Stocks finished mixed Wednesday after a government report showed the U.S. economy shrank less than feared in the third quarter, enabling Wall Street to end the treacherous month of October with a gain.
The hot action was in the bond market, which had its biggest rally since 1987 after the U.S. Treasury said it would stop selling 30-year bonds. The yield on the 30-year T-bond fell to 4.87% from 5.21% on Tuesday.
The Dow Jones industrial average ended the choppy session down 46.84 points, or 0.5%, at 9,075.14, having risen as much as 100 points earlier. The Dow's drop came on the heels of a 422-point loss Monday and Tuesday.
The broader market was stronger. The Nasdaq composite index rose 22.79 points, or 1.4%, to 1,690.20, having lost 101 points Monday and Tuesday. The Standard & Poor's 500 index was essentially unchanged, off 0.01 of a point at 1,059.78. The S&P lost 44 points Monday and Tuesday.
Winners outpaced losers by about 3 to 2 on both Nasdaq and the New York Stock Exchange in active trading.
For the month, the Dow rose 2.6%, the S&P gained 1.8% and Nasdaq advanced 12.8%--its first winning month since June.
October is known as a dangerous month on Wall Street because of market crashes in 1929, 1987, and the Dow's 554-point drop on Oct. 27, 1997, plus "back-to-back massacres in 1978 and 1979," according to Yale Hirsch, editor of the Stock Trader's Almanac 2001.
Yet October can be a "bear killer," he adds, noting that the month has turned the tide in nine bear markets: 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990 and 1998. November usually is among the top three months for the S&P 500, with December and January.
The government reported that the U.S. gross domestic product, the broadest measure of the nation's economic health, shrank 0.4% in the third quarter, its worst contraction since the first quarter of 1991. But the number beat the 1% drop forecast by economists and helped spark an early rally because it soothed fears.
"While continuing to show weakness and the onset of a recession, it was not as bad as expected," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. "This leads you to believe that the policies of lower interest rates and [tax cuts] will start to help the economy or have a greater chance of helping the economy in 2002."
Still, Wall Street is girding for bleak readings on the manufacturing sector and job market later this week as the Sept. 11 attacks haunt the nation. Most economists expect the economic contraction to last at least to the end of the year and if it does, the third quarter would mark the start of the first U.S. recession in 10 years. A recession is usually defined as at least two straight quarters of falling GDP.
An early rally in blue chips faded, dragged down by a big decline in Eastman Kodak after Moody's Investors Service cut its debt rating for the beleaguered photography giant. Kodak lost $2.23 to $25.57.
Some technology stocks rose Wednesday, helped by an improved sales forecast from bellwether Sun Microsystems, which jumped 61 cents to $10.51.
In other market highlights:
* Most financial stocks failed to get a boost from the plunge in bond yields. J.P. Morgan Chase eased 15 cents to $35.36. Insurer St. Paul dropped $2.61 to $45.90 and Morgan Stanley lost $1 to $48.92.
* Motorola climbed 23 cents to $16.37 after the wireless giant said its global market share rose in the July-September quarter from the second quarter, boosted by sales of new products.
* A pair of initial public stock offerings rose in their first day of trading. LogicVision, which makes computer chip-testing equipment, rose 61 cents to $9.61. Odyssey Healthcare, a hospice-care provider, gained $2.25 to $17.25.
Market Roundup: C7, C8