April 18, 2000
Nasdaq Composite Tops Biggest point Gain as Techs Recover
By David Runk Interactive Journal
Stocks rallied Tuesday for a second-straight day, rebounding from last week's heavy losses as renewed demand for technology shares led the Nasdaq Composite Index to another record point gain.
The Dow Jones Industrial Average closed up 184.91 points, or 1.75%, to 10767.42, adding to Monday's 276.74-point rise as support was seen from solid earnings reports as well as tech stocks.
The Nasdaq composite gained 254.35, or 7.19%, to 3793.51, topping the record point rise of 217.87, or 6.6%, posted Monday. Tuesday's gain also marked the index's second biggest in percentage terms.
Other major U.S. indexes also advanced. The Standard & Poor's 500-stock index climbed 40.06, or 2.87%, to 1441.50 and the New York Stock Exchange Composite Index gained 14.60, or 2.35%, to 634.81. Market breadth improved as advancing issues outpaced decliners nearly 2-to-1 on the Big Board.
Analysts described the two-day rally as much-needed after the Nasdaq composite closed down every day last week and the Dow industrials declined for three straight days. But none were prepared to say that the market had found its footing and wouldn't go on to test new lows.
The recovery followed a volatile week that saw some of the biggest point losses on record. The two-day rally wiped out nearly half of the Nasdaq'a tumble last week. But the composite remains down nearly 25% from its March 10 high -- firmly in bear market territory -- while the Dow industrials are down more than 8% from their Jan. 14 high.
Edward Collins, an executive vice president of Daiwa Securities America, said Tuesday's rally was a continuation of Monday's rebound, which took hold in the final hour of trading. But he said he wasn't convinced the market had reached its lows during Friday's sell-off.
Investors continued to put money back to work in the technology sector, which was hardest hit during the recent market downswing. The market's gains were helped by technology heavyweights America Online, IBM and Intel, which were scheduled to report earnings after the close of trading. Gains by shares of Microsoft and Hewlett-Packard also boosted the blue-chip index.
Michael Lyons, a senior trader at Morgan Stanley Dean Witter, said institutional investors returned to the market to pick up stocks at bargain levels. He said Monday's rebound and Tuesday's continued gains were an encouraging surprise to many on Wall Street.
"At the same time there's caution. A lot of investors got rattled by what happened the other day," Mr. Lyons said, referring to Friday's heavy losses. More strong earnings news bolstered confidence in the market. Among Dow industrials component stocks, Johnson & Johnson climbed 4 to 81 1/2 at 4 p.m. EDT after reporting a 15% jump in first-quarter net income, topping estimates.
But several companies that beat Wall Street estimates saw share prices head lower, reflecting a pattern that has emerged this earnings period of a company's stocks rising ahead its earnings report only to decline despite strong figures, said Daiwa's Mr. Collins.
Philip Morris slipped 9/16 to 20 11/16 after matching Wall Street's earnings estimate, Caterpillar lost 7/16 to 40 1/2 after posting a 26% increase in first-quarter net income and Coca-Cola slipped 13/16 to 47 11/16 after reporting better-than-expected earnings. Shares of all three companies rose during Monday's rally.
Sprint, the No. 3 U.S. long-distance company that is being bought by MCI WorldCom, saw its shares rise rose 1 to 57 3/4 after it reported first-quarter earnings that just beat Wall Street's expectations.
Financial issues Bank One, Wells Fargo and Mellon Financial also advanced, lending support to the broader subindex, after the banks reported earnings in line or better than analyst estimates.
Daiwa's Mr. Collins said he remains concerned with the market's volatility, which now routinely moves share prices of companies up or down in a few days as much as they might have once moved in six months.
"The volatility is a factor that in the past has indicated [a share's price was] very near the top," he said. "Whether that's true in this world we live in today, I'm not sure."
Earlier in the day, financial markets received a boost from news that U.S. housing starts sank 11.2% in March, their largest decline in more than six years, as rising interest rates appear to finally take hold on the housing market.
The steep slide in construction helped to calm fears that the Federal Reserve is planning to raise rates aggressively when policy makers next meet in May. Most people already have factored in a 0.25 percentage point increase in May. In major market action:
Stocks rallied. On the Big Board, where 1.09 billion shares traded, 1,971 stocks rose and 1,005 fell. On the Nasdaq Stock Market, volume reached 2.1 billion shares.
Bonds were mixed. The 30-year Treasury bond gained nearly 1/4 point, or $2.50 for a $1,000 bond. Its yield, which moves inversely to price, was down to 5.914%. The 10-year note slipped 1/8 point to yield 6.053%.
The dollar was higher. It traded at 94.50 cents to the euro and 104.70 yen to the dollar, compared with 95.20 cents to the euro and 104.49 yen to the dollar late Monday in New York.
Write to David Runk at david.runk at wsj.com