- The Washington Times - Tuesday, May 11, 2004

NEW YORK (AP) — A surge in technology shares led a moderate rally on Wall Street yesterday as investors sought bargains, picking up interest-rate-sensitive stocks that might have been oversold in the market’s latest downturn.

Investors bought technology shares, small-cap stocks and financial companies despite the knowledge they were the most vulnerable in the event of a rate increase, which could be announced at the Federal Reserve meeting in June. Interest-rate fears sent the three major indexes down 3 percent in the previous three sessions.

Analysts said the unusual buying choices represented bargain hunting by some investors, but noted that volume was much lighter than during the three-day sell-off.

“Right now, you’re seeing the markets pause a bit. I think we’re re-evaluating the sell-off to see if it’s been an overreaction to the interest rates,” said Stephen Sachs, director of trading for Rydex Investments. “We definitely have room to go down more, but near-term, say this week, we’re at some very near-term support.”

The tech-concentrated Nasdaq Composite Index gained 35.28, or 1.8 percent, to 1,931.35 after dipping below the 1,900 mark at close on Monday.

The Dow Jones industrial average closed above 10,000, one day after slipping below that mark for the first time since December. The Dow gained 29.45, or 0.3 percent, to 10,019.47.

The Standard & Poor’s 500 index was up 8.33, or 0.8 percent, at 1,095.45.

Buying was spread nearly across the board, with only health care and other defensive stocks suffering as investors took the chance on higher-risk stocks — at least for the time being. Analysts did not think that the rally was indicative of momentum in the markets, however, noting that rate fears remained among many investors.

“This is a period of extreme uncertainty. We’re going to bounce around a lot between optimism and pessimism until the Fed’s next meeting in June,” said Brian Bruce, director of global investments at PanAgora Asset Management Inc. “Earnings have been fabulous. If you focus on that, things are attractively priced. If you’re concerned about rates and the uncertainty there, then the market trades down because the uncertainty means more risk.”

Mr. Bruce noted that there were no real economic data or major earnings reports yesterday for investors to focus on, leaving them without any clear signals on the direction of the market.

May Department Stores Co., operator of Lord & Taylor, Filene’s, Hecht’s and Foley’s stores, lost 86 cents to $27.92 after missing Wall Street estimates by a penny. The company posted earnings of $76 million.

A lawsuit settlement helped Mylan Laboratories Inc. meet Wall Street estimates for first-quarter earnings. The company reiterated its yearly outlook, but said it hinged on Food and Drug Administration’s approval of a generic painkiller. Mylan rose 67 cents to $22.59.

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