Investors Hope Bull Still Running
NEW YORK (AP) _ The record-setting selloff. The unprecedented rebound. Wall Street saw more plot twists in two days than at any time in the last decade _ and there’s no guarantee that the thriller is over.
``You don’t know if it’s a dead-cat bounce or a resumption of the bull market,″ said Byron Wien, U.S. investment strategist at Morgan Stanley Dean Witter.
Selective bargain-hunting fueled a buying frenzy Tuesday that resulted in the busiest day in U.S. stock market history, wiping out more than half of Monday’s staggering 554-point plunge.
Asian markets, including Tokyo’s benchmark Nikkei Stock Average, rebounded strongly this morning in obvious relief. The Hong Kong Stock Exchange at one point was up more than 17 percent.
The Dow Jones industrial average opened Tuesday with a 178-point drop, then surged an unprecedented 337.14 to 7,498.32. More than 1 billion shares were traded on the New York Stock Exchange and the Nasdaq, both records, and nearly 3 billion shares changed hands on all U.S. markets.
IBM’s early announcement that it would buy back up to $3.5 billion worth of its stock was seen as a turning point. Companies buy back their stock to tighten the supply of shares, boosting their value and making them attractive to buyers.
As the stock of International Business Machines went higher, so did share prices of other big companies hammered by worries that economic turmoil in Southeast Asia would hurt their profits.
IBM’s announcement also boosted the battered technology sector, which was seen as particularly vulnerable to Asian troubles. The technology-heavy Nasdaq composite index surged a record 67.93 points to 1,603.02, a gain of 4.3 percent.
``Investors have learned to buy on the dips. As soon as they saw a stabilization of the market, the money came pouring in,″ said John Eade, director of research at Argus Research in New York.
But Eade and other analysts warned that more turbulence could lay ahead.
``I don’t think we have reached the depth of the turmoil in the Pacific Rim countries,″ he said.
While Monday’s record point loss ranked as the 12th worst in percentage terms, the 4.71 percent day-after rally by the Dow was only the 70th biggest.
Still, analysts said it showed the United States has one of the world’s most stable economies.
``When cooler heads prevail, the U.S. economy looks far more solid than the Far East,″ said Jim Weiss of State Street Research and Management in Boston.
And there was good news for individual investors, who were given some credit for showing persistence throughout the recent rout.
The stock market’s volatility helped the bond market, leaving long-term interest rates at 20-month lows. That makes it cheaper to buy a house or borrow money to build a factory.
Investors also were given a chance to use the buy-on-the-dip strategy that served them well in the 1987 crash and subsequent downturns in an otherwise smooth upward market.
``I’m not selling anything right now,″ said Peggy Schmeltz, 70, of Bowling Green, Ohio. ``In fact, I’m looking to eventually buy.″