Dow Rolls, Nasdaq Rocked as Rotation Brings Back Some Old Favorites
By Aaron L. Task TheStreet.com
SAN FRANCISCO The old economy strikes back with a vengeance.
Blue-chip stocks rose steadily and sharply today as investors scrambled for the relative safety of value stocks amid an ongoing selloff in tech names. A mad rush into staid, old blue-chips seemed -- at times -- reminiscent of past gains by the Nasdaq Composite Index, which suffered its third-consecutive triple-digit decline.
The Dow Jones Industrial Average climbed 320.17, or 3.3%, to 10,131.41, notching the fourth-largest point gain in its long history. The percentage rise was not similarly significant.
The venerable index was led by a wide selection of its constituents, including J.P. Morgan (JPM:NYSE), Johnson & Johnson (JNJ:NYSE), American Express (AXP:NYSE), General Electric (GE:NYSE) and United Technologies (DD:NYSE).
Of the Dow's 30 components, only Hewlett-Packard (HWP:NYSE), IBM (IBM:NYSE) and AT&T; (T:NYSE) ended in arrears.
Meanwhile the S&P; 500 rose 33.01, or 2.4%, to 1392.16 behind strong gains in financial, consumer, utility, transportation and cyclical stocks. Notably, the Dow Jones Transportation Average gained 139.94, or 5.9%, to 2521.71 and the Dow Jones Utility Average climbed 9.90, or 3.6%, to 284.02; both averages have been down significantly in recent months.
"It's a great rally and well needed to boost confidence," said one listed trader. "At these levels, there's a lot of bargains. You've got to buy 'em."
The Dow's ability to reclaim 10,000 could signal a bottom for that average, the trader said. But he quickly noted follow-through will be key, especially with the Producer Price Index for February due tomorrow, followed by the Consumer Price Index on Friday.
Those potential obstacles were relegated to afterthoughts today, however.
In technology, Intel (INTC:Nasdaq) rose 2.2% and Oracle (ORCL:Nasdaq) gained 1.5% after posting better-than-expected earnings last night. But those bellwethers could not rescue the Nasdaq, which closed down 123.95, or 2.6%, to 4582.68 after trading as low as 4568.67. The Nasdaq 100 shed 2.3%.
At its nadir, the Comp was 9.5% below its all-time closing high of 5048.62 and finished the session 9.2% below that March 10 close.
The Comp continues to be hampered by weakness in recent big gainers such as E.piphany (EPNY:Nasdaq), which fell 24.4% after announcing plans to acquire Octane Software for $3.2 billion in stock.
Other recent high-flyers suffering reversals included Akami (AKAM:Nasdaq), VeriSign (VRSN:Nasdaq) and Vingette (VIGN:Nasdaq), which slid 8.7% despite announcing a 3-for-1 stock split.
Additionally, chip and equipment makers such as PMC Sierra (PMCS:Nasdaq) retreated from their recent big advance. The Philadelphia Stock Exchange Semiconductor Index fell 2.3%.
Internet favorites also stumbled, including Yahoo! (YHOO:Nasdaq) and eBay (EBAY:Nasdaq) despite rumors of an alliance between the firms. TheStreet.com Internet Sector index fell 77.93 or 6.1%, to 1195.50.
Meanwhile, biotech stocks stabilized after yesterday's whipping. Amgen (AMGN:Nasdaq) gained 13.3% after Credit Suisse First Boston upped its recommendation to strong buy from buy.
Also, Enzo Biochem (ENZ:NYSE) rose 4.2% after receiving a patent for technology that corrects certain gene abnormalities.
Immunex (IMNX:Nasdaq) was also on the rebound, although other biotech names continued to fall. Incyte Pharmaceuticals (INCY:Nasdaq) fell 12.3% despite positive comments from Deutsche Banc Alex. Brown. The American Stock Exchange Biotech Index rose 2.1%.
A Head-Shaking Day
"This is a market that is repairing itself with such skill and precision, it's incredible," said Scott Bleier, chief investment strategist at Prime Charter. "It's working off the unusual excess that has occurred between the tech and biotech and real world companies. Everything is doing good except the things that got out of control."
Indeed, big gains were registered by sector gauges, including the S&P; Chemical Index, up 8.1%; the American Stock Exchange Pharmaceutical Index, higher by 7.4%; the Morgan Stanley Consumer Index, up 6.7%; the Philadelphia Stock Exchange/KBW Bank Index leapt 7.5% and the Amex Airline Index jumped 8.2%. In other words, all the stuff that hasn't been working for much of this year.
Bleier attributed today's "ballistic" blue-chip advance to a growing sense the Federal Reserve will not raise rates beyond its next two meetings.
Bruce Bittles, market strategist at J.C. Bradford in Nashville, observed last week's decline in Procter & Gamble (PG:NYSE) may have been the "last straw" that sent most blue-chip stocks into "oversold territory." Thus, they were primed for today's remarkable advance.
"I think a lot of the action is related to expiration," Bittles added, referring to this Friday's triple-witching expiration of stock options and futures, and index futures. "I think a lot of this is the closing out of March programs but there's no way to document that."
Meanwhile, despite the bloodletting in the past three days in so-called momentum favorites, Bleier argued there hasn't been enough pain or fear to suggest that game has ended.
"You get these little rolling corrections without anybody getting real scared" and then the Nasdaq favorites rebound sharply, he said. "I think that's what's going to happen again. You get a little correction and people start calling for the end of the world. But there hasn't really been any fear. All there is is money that has to be put to work and a serious desire to own" tech stocks.
Among other indices, the Russell 2000 fell 14.12, or 2.5%, to 558.87 while the American Stock Exchange Composite Index fell 19.39, or 1.9%, to 996.12.
In New York Stock Exchange trading, 1.3 million shares were exchanged while advancing stocks led declining issues 1,914 to 1,122. In Nasdaq Stock Market action 1.9 billion shares traded while losers led 2,739 to 1,544. New 52-week lows bested new highs 130 to 26 on the Big Board and by 164 to 52 in over-the-counter trading.
The price of the 10-year Treasury note rose 2/32 to 101 17/32, its yield dipping to 6.29%.
Market data above are preliminary. For coverage of today's top stocks in the news, see the Company Report, published separately.
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