Stocks Rebound From Slide in Big Way

Wall Street halted its slide Thursday as buyers poured back into stocks and drove major indexes to their biggest gains in at least five months.

The explosive rally, after three weeks of mostly falling share prices, buttressed the view that the year-old market advance hasn’t run its full course, some bullish analysts said.

“It suggests that people are looking at the broader picture and are thinking, ‘There sure is a lot to like’ ” about the economy and stocks, said Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis.

Buying by “short sellers” also may have helped boost the market, as some traders who had been betting on lower prices rushed to hedge their bets, analysts said.

The blue-chip Dow Jones industrial average jumped 170.59 points, or 1.7%, to 10,218.82, in the largest one-day percentage gain since Oct. 1.

The technology-dominated Nasdaq composite index, which had led the market lower over the last month, soared 57.69 points, or 3%, to 1,967.17. It was Nasdaq’s best day since July 7.

As of Wednesday, most major indexes had fallen between 5% and 10% from their multiyear highs reached this year. The pullback, amid concerns about the economy and renewed terrorism fears, was the sharpest “correction” the market had experienced since it began to rally one year ago.

After Thursday’s surge, the Dow and the Standard & Poor’s 500 index both were off less than 5% from their recent highs. A drop of 5% is considered the minimum threshold for a genuine correction, which Wall Street defines as a temporary setback in a longer-term market rally.

“If this was a correction, there wasn’t much to it,” Paulsen said.

Analysts said there was no single catalyst for Thursday’s buying wave. Some said investors were cheered by the government’s report that new claims for jobless benefits last week were near the three-year low of the previous week. That raised hopes that the March employment report, due April 2, would show better-than-expected job growth -- which, in turn, could boost optimism about the staying power of the economy’s recovery.

Falling oil prices also may have helped bolster stocks. Near-term crude oil futures in New York sank $1.50 to $35.51 a barrel, a further retreat from last week’s 13-year highs, on doubts that the Organization of the Petroleum Exporting Countries would stick with production cuts planned for April.

But many analysts said the market was primed for at least a short-term rebound after the losses of recent weeks. Through Wednesday, the Dow had fallen in 10 of the previous 13 sessions.

Excessive pessimism had built up in the aftermath of the Madrid terrorist bombings March 11 and on concerns about the economy, said Todd Salamone, research director at Schaeffer’s Investment Research in Cincinnati.

By Wednesday, some investors decided that the sell-off had gone far enough, Salamone said. Twice in that trading session the Dow threatened to fall below 10,000, but buyers jumped in both times to keep the index above that psychologically important mark.

On Thursday stocks began to lift off early in the session and the rally continued to gain steam through the day. Rising stocks outnumbered losers by more than 2 to 1 on the New York Stock Exchange and by nearly 3 to 1 on Nasdaq, in active trading.

As the market advanced, it spurred buying by short sellers -- traders who had previously borrowed stock and sold it, betting that prices would continue to fall. When the tide turns against them, short sellers often rush to purchase shares to repay their loans and close out their bets. Their buying can help to stoke a rally already underway.

Such moves aside, many Wall Street pros say investors are returning to stocks because the fundamentals of low interest rates and rising corporate earnings favor higher prices.

First-quarter earnings reports, due in April, are expected to be robust overall. In recent weeks, the number of major companies raising their estimates of first-quarter results has exceeded the number warning of disappointing results, according to Reuters Research.

On Thursday, Avon Products shares surged $4.78 to a record $75.35 after the company said it expected to earn 59 cents a share this quarter, up from its previous estimate of 50 cents.

Santa Monica-based video game maker Activision jumped $1.52 to $15.14 after saying it expected to record a profit this quarter instead of a loss, thanks to better-than-expected sales.

First-quarter earnings “will get people to focus on the fundamentals again,” said Sam Stovall, investment strategist at Standard & Poor’s in New York. He projects that the S&P; 500 index will end the year at 1,230, which would be an 11% rise from Thursday’s closing level.

Although Wall Street still is concerned about the risk of more terrorist attacks, “When the fundamentals are really good, it allows you to handle exogenous shocks” better, Paulsen said.

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End of pullback? Key stock indexes soared Thursday, paring their losses from recent highs.

Percentage change: From Index Thurs. ’04 high

Nasdaq compos. +3.0% -8.7% Russell 2,000 +2.5 -5.0 S&P; small-cap +2.1 -4.1 S&P; mid-cap +1.8 -4.5 Wilshire 5,000 +1.7 -4.2 Dow indus. +1.7 -4.8 S&P; 500 +1.6 -4.2 NYSE compos. +1.4 -4.7

Source: Times research