Lower stock prices entice investors
NEW YORK (AP) — Galvanized by hopes that the market's worst days are over, investors bought stocks enthusiastically Monday, sending the Dow Jones industrials surging more than 400 points for the second time in four sessions.
The Dow also had its third-largest one-day point gain.
The stunning advance, which saw the Nasdaq composite index rise more than 70 points, followed the market's first upbeat week in more than two months. Analysts believe investors, becoming more comfortable about earnings and less worried about corporate bookkeeping, are ready to buy again.
Prices depressed by 10 weeks of selling have also been a big draw.
"Investors are just realizing that the market looks pretty cheap today," said John C. Forelli, portfolio manager for Independence Investment LLC in Boston.
The Dow closed at its high of the session, up 447.49, or 5.4 percent, at 8,711.88, its third-best one-day point gain ever. That followed Wednesday's 488.95-point win, which was second to the 499.19-point gain of March 16, 2000. The Dow had two positive sessions last week, advancing 78 points on Friday.
Since last Tuesday, when the Dow closed at a four-year low of 7,702.34, the Dow has regained 1,009 points. It has recovered 38 percent of the 2,650.74 it had lost since May 17, the last time all three major indexes had a weekly advance.
The broader market also rose sharply yesterday. The Nasdaq composite index climbed 73.13, or 5.8 percent, to 1,335.25, having risen 27 on Friday. The Standard & Poor's 500 index advanced 46.12, or 5.4 percent, to 898.96, following Friday's 14-point gain.
Analysts were encouraged by the market's ability to shake off the latest report of accounting problems, this time at Qwest Communications, which said it was restating results for 2000 and 2001. Qwest, which also withdrew its 2002 financial forecast, slipped 1 cent to $1.49 but didn't impede the market's upward progress.
But for the market to sustain an advance, analysts say bookkeeping scandals must end and companies must be made to face tougher punishments.
"The market shrugged off Qwest. Information like that should be priced into the market. ... But the credibility building is going to be a long and slow process. We are not looking at a rapid rebound like this every day," Forelli said.
Events last week, namely the arrest of Adelphia executives on Wednesday for allegedly stealing from the company, soothed worried investors' and helped the market recover a lot of its steep decline. The market and investors also got a boost from House and Senate negotiators agreeing on Wednesday to legislation that would create tougher punishments for fraudulent accounting.
Some market observers said they're now concerned the market is going from cheap to pricey too quickly.
"You have to be pretty quick to take your gains, and not assume the market is going to go straight up," said Susan L. Malley, chief investment officer for Malley Associates Capital Management.
Yesterday's gains were seen across most market sectors, in keeping with how widespread the recent sell-off was.
IBM climbed $4.78 to $71.18, General Motors advanced $3.04 to $46.09, and Citigroup rose $2.57 to $33.31.
Cardinal Health rose $4.65 to $57.15 on after Credit Suisse First Boston upgraded it to "strong buy" from "buy."
Retailers also advanced, with Williams-Sonoma rising $2.64 to $26.20 on an upgrade to "buy" from "market perform" by Lehman Brothers. Tommy Hilfiger rose $1.10 to $13.30 on fiscal first-quarter earnings that were 3 cents a share higher than expectations.
Analysts say investors are starting to feel more comfortable about buying stocks after pummeling prices to four- and five-year lows. But analysts caution that the market will have a difficult time holding its gains until earnings outlooks sufficiently improve and accounting becomes more dependable.
"It has been a trading market, and it will probably still be a trading market. It won't be straight up," Malley said. "We're still going to have lots of bumps."
Advancing issues outnumbered decliners more than 4 to 1 on the New York Stock Exchange. Consolidated volume totaled 2.12 billion shares, compared with 2.19 billion Friday.
The Russell 2000 index, the barometer of smaller company stocks, rose 18.55, or nearly 4.9 percent, to 400.81. It was the Russell's first close above 400 since July 17 when it stood at 409.69.
Overseas, markets were higher yesterday Japan's Nikkei stock average closing up 0.8 percent. Stocks rose sharply in Europe. France's CAC-40 surged 7.0 percent, Britain's FTSE 100 climbed 4.6 percent, and Germany's DAX index soared nearly 7.9 percent.