Dow Snaps 3-Day Losing Streak
Stocks rebounded modestly Wednesday from Tuesday's plunge after a bumpy ride that took the Dow Jones industrials down by as much as 125 points in the final hour of trading.
The Dow Jones Industrial Average rose 59.73 points, or 0.7 percent, to 8,547.04. Procter & Gamble, Wal-Mart Stores led the index.
After edging higher in stair-step fashion during the morning session, large-capitalization stocks met with computerized sell programs in the afternoon, with the Dow trading off as much as 125.39 points by 3:24 p.m. ET.
But computerized buy programs sent stocks higher in the final 30 minutes, allowing the Dow to brake a three-day losing spell.
"It's my best estimate that we'll have some rallies in here, but they may be short-lived," said Edward Wedbush, president of Wedbush Morgan Securities. "I've been on the bearish side due to the significant impact of Asia's crisis. The situation involving President Clinton is also troublesome for the market, as is the high price-earnings ratios of the market.
"It's not too late for investors to be raising cash," said Wedbush. "Some of the small-cap stocks that are attractive are already down more than 20 percent this year and I think it's not timely to sell those kinds of securities. I think securities that are selling at extraordinarily high price-earnings ratios are more vulnerable.
"So, there's a lot of opportunity for shopping in small-cap stocks, but you don't have to be in a hurry, and an opportunity still exists on rallies to raise cash in the high p-e ratio stocks."
"There is no fundamental justification for the recent stock market correction," Edward M. Kerschner, chief investment officer at PaineWebber Inc., said in a research note. "It is very likely that 12 to 18 months from now stocks will be 20 percent-plus higher. On a price-earnings basis, stocks have not been this attractive since October 1990.
"The profit picture is not in jeopardy," he said. "The median percent change in second-quarter earnings for the S&P 500 firms was +10 percent. We would be aggressive buyers, and we believe that if investors buy today, six to 12 months from now they will be glad they did."
Tuesday, the Dow tanked 299.43 points, or 3.4 percent, to 8,487.31.
It was the key gauge's worst percentage loss since the Oct. 27, 1997 free-fall of 7.2 percent. Through Tuesday's close, the Dow had fallen 880.53 points, or 9.4 percent, from its intraday record peak of 9,367.84 on July 20.
Widely followed market analyst Abby Joseph Cohen of Goldman Sachs remains bullish, telling clients Wednesday the market pullback is overdone and that stocks are at the bottom of a trading range. She sees the Dow surpassing 9,300 by year-end.
In a sidelight to the nervous opening at the New York Stock Exchange, Chairman Richard Grasso was petting a lion on a balcony overlooking the trading floor. The lion the logo for Anglogold Ltd., the world's larges gold producer. Its American shares were listed on the NYSE for the first time Wednesday.
In Wednesday's market highlights:
- The Standard & Poor's 500 Index rose 0.9 percent.
- New York Stock Exchange losers bettered winners by 1,825 to 1,255.
- On the Big Board floor, turnover increased 4 percent to 857 million shares.
- The Nasdaq Composite advanced 0.1 percent. Declining issues led advancers by 27 to 17 in the Nasdaq Stock Market. Volume totaled 899 million shares.
- The Russell 2000 Index of small-capitalization stocks fell 0.7 percent.
- In the bond market, the 30-year Treasury lost 17/32, to yield 5.667 percent.