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Stocks Up After Last Week’s Fall

September 27, 1999

NEW YORK (AP) _ Stocks rose broadly today as traders returned to Wall Street looking for bargains following the Dow industrial’s biggest weekly point loss ever. Technology shares led the way.

The Dow Jones industrial average rose 24.06, or by 0.2 percent, to close at 10,303.39 after being up as much as 123 points this morning. Even with the selloff last week, the Dow is up more than 12 percent so far this year.

Broader indicators also rose on volume that was below Friday’s heavy pace.

``We’re seeing an oversold market, and bargain-hunting taking over,″ said Richard Cripps, chief market strategist for Legg Mason of Baltimore. He said investors seem to be going back to technology stocks, which were big catalyst for the market before the past week’s selloff.

A rise in the dollar also helped support stocks. World finance ministers this weekend expressed concern for the sharp rise in the Japanese yen against the dollar in recent months, raising expectations that the dollar would regain some of its lost ground.

In New York trading today, the dollar leaped to a late rate of 106.00 yen from 104.17 yen late Friday and a 3 1/2-year low of 103.20 yen on Sept. 15.

A weak dollar has hurt U.S. stocks on several fronts. When the dollar falls, imports are more expensive, adding to inflation. In addition, when other currencies are more attractive, international traders may pull money out of dollar-denominated assets, such as stocks, to invest elsewhere.

Overseas, markets were mixed.

Japan’s key stock indicator dipped 0.3 percent, and in Hong Kong, stocks fell 2.1 percent, as the dollar continued to struggle against the yen in Asian trading. There is concern that if the yen gets too strong, it will derail Japan’s recovery from a deep recession, slowing growth throughout Asia.

But stocks in Europe got a lift as the dollar gained ground later in the day and as Wall Street opened higher. Major stock indexes closed with a jump of 2.4 percent in London and were up 1.2 percent in Paris and 1.0 percent in Frankfurt, Germany.

Last week, the Dow Jones industrial average fell a total of 524.30 points, tumbling more than 200 points in two separate sessions. The plunge left the Dow 1,046.71 points, or 9.2 percent, below its record close of 11,326.04, set Aug. 25.

Broader market indicators also fared poorly. The Nasdaq composite index, which lists most of the world’s leading technology companies, lost 129.21 points over the course of the week.

The tumble surprised few Wall Street analysts. In recent weeks, even as the Dow and the Nasdaq hit new records, many market watchers remained troubled about signs of ill health in the market. Above all, analysts worried that the strong performance of the Dow’s blue-chip stocks and technology leaders like Intel and Microsoft wasn’t shared by the broader market.

Last week, the market lost its last bastion of strength. Semiconductor stocks tumbled Wednesday, a day after an earthquake hit Taiwan, a major production center for the chips and components used in computers.

And on Thursday, Microsoft president Steve Ballmer sent the market spinning by telling reporters he believes technology stocks are too pricey.

``There is such an overvaluation of tech stocks that it’s absurd,″ he said at a conference of the Society of American Business Editors and Writers. ``I would put our company and I would put most companies in that category.″

The economic factors that drove stocks lower last week haven’t disappeared. The dollar lingers near its lowest levels against Japan’s yen since 1996. Investors also remain worried that the Federal Reserve at its Oct. 5 meeting will raise interest rates for the third time this year to cool the economy.

Higher interest rates can hurt stocks by cutting into corporate profits as borrowing costs escalate. That can make bonds, with their guaranteed rate of return, more appealing.

The calendar could be another menace. Some of the worst market declines in history have come in October, from the 1929 crash that launched the Great Depression to the 554.26-point drop on Oct. 27, 1997.

``It’s a scary time of year,″ said Brian G. Belski, chief investment strategist at George K. Baum & Co in Kansas City. ``By September or October, you know where a company’s fundamentals are for the year, and a lot of investment managers make their buy and sell decisions based on that.″

Still, analysts see at least two potential benefits from last week’s sharp selloff. Some economists feel the market’s decline could convince the Fed that an interest rate increase isn’t necessary.

``This past week’s stock market slide has virtually ensured the Fed will not move in the direction of another rate hike,″ said Kathleen Camilli, director of economic research at Tucker Anthony.

Fed Chairman Alan Greenspan has voiced concern over the lofty levels of the stock market, and said last month that the Fed would keep an eye on the market. Last week’s selloff, some analysts reason, could convince the Fed that the stock market, at least, has not reached inflationary levels.

Also, investors could seize the chance to buy stocks at their new, lower prices.

``This is an overdue opportunity to shake out some of the market’s excesses,″ said Scott Bleier, chief investment strategist at Prime Charter Ltd. in New York.

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