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Market's Gains Pile Up

November 01, 1998|TOM PETRUNO

Wall Street can't agree on whether the summer market plunge was a true bear market or a mere "correction" in an ongoing bull market. Likewise, there's confusion about what to call the powerful rally of recent weeks--a new bull market, another leg of the old one, or a "sucker's rally"?

The Dow industrials rose 1.7% last week to end Friday at 8,592.10, bringing the gain from the Aug. 31 low of 7,539.07 to 14%. From its record high of 9,337.97, the Dow now is off 8%.

The rebound has been much more dramatic in smaller stocks, which had fallen much more sharply. The Russell 2,000 index of smaller stocks, up 3% last week to 378.16, has surged 21.8% from its low reached Oct. 8. But it's still off 23% from its record high.

A classic bear market is defined as a drop of 20% or more from peak prices. By that yardstick, the Russell index was well into bear territory. But the blue-chip Dow and S&P 500 fell just shy of 20%.

Whatever this stock rally is, it's powerful, global and still faces plenty of skeptics--which, to a contrarian, could be very bullish.

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