Nasdaq recovers after morning sell-off pushes index below post Sept. 11 low
NEW YORK (AP) — A burst of buying sparked an afternoon rally Monday on Wall Street, reversing an earlier sell-off that sent the Nasdaq composite index below the closing low it reached after the Sept. 11 attacks.
Stocks ended mixed overall, but the major indexes had their first winning session in a week.
Analysts said the gains reflected buying by traders to cover bets that stocks would fall further, rather than any improvement in investor confidence. The approach of the end of the second quarter on Friday also increased the volatility.
"The market is groping for a bottom, and we haven't found yet a catalyst to bring in aggressive buyers," said Robert Streed, portfolio manager of Northern Select Equity Fund in Chicago.
The technology-dominated Nasdaq closed up 19.38, or 1.3 percent, at 1,460.34, rebounding from an earlier decline of 26 points that put the index nearly 9 points below its Sept. 21 close of 1,423.19. Sept. 21 marked the end of the first week of trading following the terrorist attacks.
The Dow Jones industrial average rose 28.03, or 0.3 percent, to 9,281.82, putting it more than 1,000 points above its Sept. 21 finish.
Other indicators also recovered. The Standard & Poor's 500 index, which had come within 5 points of its Sept. 21 close, advanced 3.58, or 0.4 percent, to 992.72.
The Dow, which traded between a gain of 116 points and a loss of 170 points during the day, owed much of its comeback to its tech components, including IBM, Microsoft and Intel.
IBM rose 95 cents, or 1.4 percent, to $69.70 despite falling early in the session after Goldman Sachs reduced its estimates on the stock because of difficult business conditions. Intel rose 60 cents, or 3.2 percent, to $19.33, while Microsoft soared $1.88, or 3.6 percent, to $54.16.
Many of yesterday's gains were attributed to what's known as short covering. In short covering, investors have to buy stock to replace shares that they borrowed earlier and sold on the expectation of further declines.
But analysts say the fundamental problems that caused the Nasdaq to dip below its post-Sept. 11 milestone remain: bleak corporate earnings prospects, accounting scandals and the possibility of more terrorism.
Technology stocks have been particularly hard-hit by the continuing market malaise. With the economic turnaround less robust than investors had hoped, companies in a variety of industries have cut back their purchases of high-tech equipment and software.
The second-quarter earnings reports due out next month were supposed to reassure investors that business was improving. Instead, a string of warnings from companies have made many investors reluctant.
Consolidated volume came to 1.89 billion shares, compared with 2.3 billion Friday. Volume was unusually heavy Friday because it was what's called a triple-witching session, the quarterly expiration of index futures and index and stock options.