- The Washington Times - Tuesday, April 18, 2000

Dow, Nasdaq show strong point gains

NEW YORK Still reeling from one of the worst weeks in Wall Street history, investors returned to the market yesterday with money to put to work and caution to spare. Old, reliable blue-chip stocks, including drug companies and consumer-goods makers, rose, and the largest, most stable technology stocks also regained ground.
But volatility ran high. On a day when the Nasdaq Composite Index had its biggest point gain ever, more stocks fell in price than rose. The poor breadth suggested that the angst that sent the market into a free fall last week has not yet eased.
Many analysts expect the market to fully recover its devastating losses from last week, but most expect some tentative trading days first.
"Bargain-hunters are picking around some names that now look like very good deals, but to say people are nervous is an understatement," said Tony Cecin, head of equity trading at Piper Jaffray in Minneapolis.
The blue-chip stocks in the Dow Jones Industrial Average attracted the most buyers yesterday as investors sought their stable, predictable earnings and less volatile behavior. The Dow ended the session up 276.74 points at 10,582.51.
The Nasdaq composite index finished with its biggest point gain in history, rising 217.87 to 3,539.16. Its rise of 6.6 percent was the second-largest daily percentage increase ever. On Friday, the Nasdaq fell a record 355 points, and last week it plummeted a record 25 percent. Gains mounted in the final hour of trading yesterday, ending last week's disturbing pattern of late-day sell-offs and allowing some analysts to hope that the worst is over.
"The trend of last-minute selling denoted a real lack of confidence. This was the first time in a long time that we saw some conviction and real buying interest throughout the session, and that's encouraging," said Eugene E. Peroni Jr., director of equity research at John Nuveen & Co. in Radnor, Pa.
Yesterday, a number of Wall Street strategists tried to entice their clients to buy more stocks, arguing that the sharp decline presents an opportunity to buy top technology names that have been unaffordable for the past few months.
"We would rather be putting cash to work than raising cash at this juncture," said Elizabeth Mackay, chief investment strategist at Bear Stearns.
Tom Galvin, chief equity strategist at Donaldson, Lufkin & Jenrette, boosted his recommended allocation of stocks to 90 percent from 80 percent to take advantage of prices he now considers "cheap."
"We'd argue that now is the time to increase your weighting in technology stocks," said Jeffrey M. Applegate, chief investment strategist at Lehman Brothers, adding that many technology stocks went from overvalued to undervalued in the course of just a few sessions.
Still, analysts were unanimous in recommending that investors stick to well-known technology companies that have strong, growing earnings and clear business plans.
"The flawed business models are in the process of failing, as any shareholder of Dr. Koop, CDNow and Peapod can tell you," Mr. Applegate said.
Those three Internet stocks are among hundreds that have been decimated by investors' stampede away from the technology sector. Yesterday, Dr. Koop.com fell 25 cents to $2.37 1/2; CDNow fell 46 7/8 cents to $3.03 1/8; and Peapod rose 12 1/2 cents to $3.31 1/4.
All three companies, which flourished after their initial public offerings, now are struggling to survive. Their shareholders, who purchased them on the promise of future growth, have sustained crushing losses.
The decline of the once high-flying Internet stocks may be the most significant legacy of last week's rout, analysts said.
"You won't see those second- or third-tier technology companies getting so far ahead of themselves in the future," Mr. Peroni said.
Mr. Cecin agreed. "People are getting rid of stocks that have questionable earnings or business plans that don't really hold up under scrutiny," he said.
That gravitation toward tried-and-true issues helped the Dow Jones Industrial Average to its sharp gains. Technology stocks led the Dow's advance, too, with Intel, Hewlett-Packard and International Business Machines providing the biggest boost.
But old-line consumer and industrial stocks also rose sharply. Procter & Gamble, which fell from favor earlier this year after releasing a dour profit warning, rose $6.12 1/2 to $69. Johnson & Johnson, United Technologies and General Motors also gained.
Investors willing to put money back into the market were making bets that the worst was over for the representatives of the old economy, analysts said.
"The market outside technology is fairly valued and doesn't need to correct any more than it has," said Edward Yardeni, chief economist at Deutsche Bank Securities.
While the mood on the floor of the New York Stock Exchange lightened considerably from last week, NYSE Chairman Richard Grasso took a fairly cautious approach, too.
"By no means is one day a reversal of what we've experienced," Mr. Grasso said in an interview with the cable financial network CNBC. But he said investors appeared to be looking ahead to the possibility of future market gains.
"People are much, much more willing to take a long-horizon approach, and that's what the market is saying now," he said.

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