- The Washington Times - Tuesday, July 16, 2002

The Dow Jones Industrial Average went on a roller-coaster ride yesterday, falling 440 points and touching close to its post-September 11 low before roaring back at the end of trading.
At the start of one of Wall Street's wildest days, the century-old blue-chip index appeared bent on mimicking the decline of other major indexes, which last week sank to their lowest levels since 1997. But enticingly low stock prices attracted bargain hunters, whose buying spree sparked a late rally, leaving the Dow off 45 points to close at 8,639.
Stock traders were far from certain the rally could be sustained, in view of the parade of corporate scandals that has doused investor confidence this year and increasing concern that the economy could be dragged down by the vicious bear market.
"Investors have been through the period of throwing in the towel," said Kevin Gaughan of Strong Capital Management Inc. "What we can't tell is when this is over."
Some analysts were hopeful that panicky trading early in the day, with nearly 2 billion shares trading hands, signaled that investors were capitulating in the kind of massive sell-off that marks a bottom in the market a bullish sign for the future.
"You have as much full-fledged panic as you are going to get," said Tony Cecin, director of institutional trading at US Bancorp Piper Jaffray in Minneapolis. "The negative mentality is as pervasive as I have ever seen it, and I went through the '73 and '74 bear market."
The Nasdaq Composite Index and Standard & Poor's 500 Index also posted steep losses but recovered late in the day, with the Nasdaq managing to eke out a nine-point gain to 1,383 at the close.
Foreign as well as U.S. investors registered their disdain with stocks, driving the dollar down to parity with the euro for the first time in more than two years. The dollar's losses this year have further diminished the attraction of U.S. stocks for overseas investors.
While the bargain hunting in the last 90 minutes of trading lifted hopes, some analysts attributed the sharp rebound to a sudden pullback by investors who had been betting against stocks on the expectation that mutual funds would report late in the day that small investors redeemed shares last week.
Fears of massive redemptions did not materialize, despite anecdotal accounts that increasing numbers of small investors were deserting the market.
"Some people are calling up and telling us they want to go to cash, to go to the sidelines," said Jeff Land, a Schwab investment consultant in Detroit. "That's not our recommendation. But in this kind of market, a lot of clients are feeling panicked."
Investors were not moved by President Bush's speech aimed at bolstering confidence in the economy and restoring faith in the market.
"I don't think the economy is going to pick up as much as everyone thinks it is," said Roger Hing, 70, a retired electronics engineer in Fountain Valley, Calif., who has been selling stocks this year despite assurances that the economy is recovering.
"Just as the markets were driven on the upside by emotion euphoria and greed this market is driven by fear and despair," said Hugh Johnson, chief investment officer at First Albany Corp. "It is not at all unusual for the market to disconnect from the economy and earnings when fear takes hold."
Bookkeeping concerns weighed on Duke Energy Co., which fell $1.05 to $23.70 after being downgraded by Morgan Stanley, Salomon Smith Barney and Goldman Sachs. On Thursday, Duke said it had received subpoenas from the Commodity Futures Trading Commission and the Houston office of the U.S. attorney for information related to its trading activities.
Energy company El Paso Corp., which said it received a similar subpoena Friday from the Houston office of the U.S. attorney, declined 25 cents to $17.50.
Other losers included 3M, down $1.98 at $118.89, and Johnson & Johnson, which fell $1.50 to $49. General Electric declined 35 cents to $28.25, despite reaffirming its yearly earnings outlook last week.
But Coca-Cola rose 95 cents to $52 after news that it would adjust its accounting to report results more fairly. Coke is one of a handful of companies taking the lead in saying it would deduct stock options as an expense, like it does other forms of employee compensation.
Dell Computer advanced 42 cents to $25.44, having raised its second-quarter earnings and revenue estimates on Thursday.
This story is based in part on wire service reports.

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