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Dow: the comeback kid
World's most widely watched market gauge posts biggest gain in four months; falling oil helps.
March 30, 2005: 6:01 PM EST
By Alexandra Twin, CNN/Money Staff Writer
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NEW YORK (CNN/Money) - A broad stock rally Wednesday revived a battered market, giving the Dow its best one-day point and percentage gain in four months.

The Dow Jones industrial average (up 135.23 to 10,540.93, Charts) jumped about 135 points, or 1.3 percent. The gain marked its best single-session advance since Dec. 1.

The broader Standard & Poor's 500 (up 16.05 to 1,181.41, Charts) index rose 1.4 percent, while the Nasdaq composite (Research) added 1.6 percent.

Gains were broad-based, with 29 of 30 Dow issues rising.

A slide in Treasury bond yields and modest gains in the U.S. dollar added to the upbeat mood on Wall Street.

A big drop in oil prices and a bounce in the much-maligned tech sector helped fuel the rally. But then momentum took over, and the advance managed to sustain itself through the close, even as oil prices recovered from most of the morning's losses.

"I think we've had a pretty significant correction in the stock market since the highs in early March, and we've reached a level that seems to be bringing in buyers," said Timothy Ghriskey, chief investment officer at Solaris Asset Management.

The Dow industrials and the S&P 500 closed at their highest levels of the year on March 4 and 7, respectively. The two indexes, along with the Nasdaq, have been sliding since then.

The Nasdaq has been hit the hardest, and is currently down more than 6.5 percent for the year. Because of that, tech stocks were particularly buoyant.

In addition to these factors, Ghriskey said that the recent recovery in the dollar likely helped markets as well, in that it's likely brought in more international investors.

Thursday is the last day of the quarter, an occasion which can often bring in more buyers as portfolio managers seek to put cash to work before they close their books. Currently, Nasdaq and S&P futures are pointing to a fairly flat open, when fair value is taken into account.

February reads on personal spending and income, as well as factory orders, are all due Thursday. The Chicago PMI, a regional read on manufacturing, is also on tap.

While these numbers will be relevant, "I think the employment report is the most critical," said John Davidson, president and CEO at PartnerRe Asset Management.

Friday's monthly employment report is expected to show that employers added 220,000 jobs to their payrolls in March, after adding 262,000 in February. The unemployment rate, generated by a separate survey, is expected to have fallen to 5.3 percent in the month from 5.4 percent in the month.

A number just below forecasts might be enough to give stocks the much-craved middle ground that indicates a strong, but not too strong economy, Davidson added.

Wednesday's market

Oil prices dropped following a report saying crude inventories rose 5.4 million barrels in the week, more than doubling analysts' estimates. Moreover, distillate fuels, used in heating oil, fell less than expected.

Prices reached a trading low at $52.50, down more than $5 from the all-time intraday high at $57.60 struck on March 17, giving traders an excuse to buy back into the battered market. However, prices snapped back by the close.

U.S. crude oil for May delivery settled at $53.99 a barrel on the New York Mercantile Exchange, down just 24 cents.

"Oil is playing a positive role for stocks and the bond market today," said Stephen Stanley, Chief Economist at RBS Greenwich Capital. "Also, the markets are coming off a rough stretch, which makes this bounce pretty understandable."

Wednesday's rally follows a few tough weeks for stocks.

Tuesday's declines, coupled with the market's recent three-week slide, had put the Nasdaq at its lowest point in five months and the Dow and S&P 500 at the lowest point in two months.

Treasury prices also edged higher, lowering the yield on the 10-year note to 4.55 percent from 4.57 percent Tuesday. Earlier in the week the yield on the benchmark note hit an eight-month high at 4.64 percent. Bond prices and yields move in opposite directions.

A positive -- but not too positive -- read on gross domestic product (GDP) growth helped early sentiment Wednesday. The revision showed economic growth at a 3.8 percent annual rate in the fourth quarter, unchanged from the February report. Economists surveyed by Briefing.com thought GDP would be revised up to a 4.0 percent rate, in line with the third quarter.

Tech advance

Techs led the advance, with a variety of stocks bouncing after the recent selloff.

Internet shares were particularly strong, lifting the Goldman Sachs Internet (Charts) index by 2.9 percent.

Amazon.com (up $0.89 to $34.32, Research) Yahoo (up $1.32 to $33.48, Research) and eBay (up $1.59 to $37.69, Research) all paced the advance for the sector.

Chip stocks also rallied, lifting the Philadelphia semiconductor (up 9.50 to 419.66, Charts) index, or the SOX, 2.3 percent.

Among the day's gainers was Micron Technology (up $0.36 to $10.48, Research), which was up more than 2 percent Wednesday afternoon on news that its recent quarterly earnings topped estimates. The chipmaker reported a loss a year earlier.

EMC (up $0.41 to $12.39, Research) was up about 3 percent after Morgan Stanley initiated coverage on the computer data storage maker with an "overweight" rating.

Hewlett-Packard (up $0.22 to $22.00, Research) named Mark Hurd as its new chairman and chief executive, the company said late Tuesday, confirming earlier reports. Hurd, the chief executive of NCR, replaces the recently ousted Carly Fiorina.

Shares of HP rallied 10 percent Tuesday amid talk of the hiring, and gained 1 percent Wednesday.

Other movers

Airlines were stronger on the back of AMR (up $1.10 to $11.03, Research), which jumped about 11 percent. The American Airlines parent issued upbeat first-quarter revenue and gross margin forecasts, despite pricing pressure in the industry.

The strength in the airline sector lifted the Dow Jones transportation average (up 62.75 to 3,736.32, Charts) by 1.7 percent.

Pfizer shares rose after a judge halted sales of generic versions of its Accupril blood pressure drug, dealing a blow to copycat manufacturers Teva Pharmaceuticals Inc. (Research) and Ranbaxy Laboratories Ltd.

American International Group (down $1.04 to $57.16, Research) slipped after saying it's delayed its quarterly results and acknowledged some improper transactions. The insurer is under investigation by the SEC and New York Attorney General Eliot Spitzer's office. Ratings agency Standard & Poor's also cut AIG's top debt rating, which could make its borrowing costs higher.

And Corgentech (down $2.60 to $2.43, Research) shares lost nearly 52 percent of their value after the biopharmaceutical developer pulled the plug on a product intended for use in coronary artery bypass graft surgery.

Market breadth was positive. On the New York Stock Exchange, winners beat losers three to one as 1.67 billion shares changed hands. On the Nasdaq, advancers topped decliners by more than two to one on volume of 1.75 billion shares.

In currency trading, the dollar gained modestly against the euro and the yen.

COMEX gold rose 90 cents to settle at $429.50 an ounce.

In global trade, Asian-Pacific markets ended mixed and European markets closed lower.  Top of page

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