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Stocks Gain as New Quarter Looms

'Window dressing' helps major indexes end their three-session skid. The dollar falls on rumors of sales by hedge funds.

September 30, 2003|From Times Staff and Wire Reports

The stock market on Monday scored its first gain in four sessions, while the dollar suffered another sharp hit and bond yields rose.

Wall Street was helped by end-of-quarter "window dressing" by money managers who were looking to add some of the quarter's strong performers to their portfolios, traders said. The third quarter ends today.

The dollar, which hit a three-month low against the euro and a three-year low against the yen, was buffeted by rumors about hedge fund trades and shifts in government policy.

The stock market had tumbled last week on concerns about the economy and on fears that the newly weakened dollar could depress foreign investors' appetite for U.S. securities.

But buyers returned Monday, pushing the Dow Jones industrial average up 67.16 points, or 0.7%, to 9,380.24. The Dow dropped 3.4% last week.

The Standard & Poor's 500 index rose 9.73 points, or 1%, to 1,006.58 after falling 3.8% last week, and the technology-dominated Nasdaq composite gained 32.49 points, or 1.8%, to 1,824.56 after losing nearly 6% last week.

Winners topped losers by 23 to 10 on the New York Stock Exchange and by 19 to 12 on Nasdaq, though trading slowed from recent sessions.

Despite last week's losses, the stock market is poised to post its second straight quarterly gain. The last time all major indexes rose two quarters in a row was at the end of 1999 and the start of 2000, when the last bull market peaked.

As of Monday, the Dow was up 4.4% for the quarter, the S&P 500 was up 3.3%, and Nasdaq was up 12.4%.

Some investors responded Monday to the government's report that consumer spending rose briskly in August. That helped dispel some of the fears that the economy was losing momentum.

What's more, many investors are betting that U.S. companies overall will report strong third-quarter earnings.

"We are expecting some positive earnings surprises," Richard Weiss, chief investment officer at City National Asset Management in Los Angeles, told Bloomberg News. "We see the economic recovery in place and intact."

But that sentiment couldn't help the dollar. It slumped to a three-year low of 110.91 yen from 111.91 on Friday. The euro jumped to a three-month high of $1.159 from $1.147.

The dollar began to sink last week after the Group of 7 industrial countries said it would seek more "flexibility" in exchange rates -- which many analysts took to mean a weaker buck.

The Bush administration is hoping that a falling dollar will make U.S. products less expensive abroad, analysts say.

On Monday, traders said there were rumors of heavy dollar sales by hedge funds. There also was talk in the market that Medley Global Advisors would issue a negative report on the dollar. The influential geopolitical advisory group would neither confirm nor deny the rumor.

Officially, the Bush administration continues to say that it supports a strong dollar. Asked Monday about the greenback's latest slide, a Treasury spokesman said, "We are not going to respond to every goofy market rumor on currencies."

As the dollar fell and the stock market advanced, some investors dumped Treasury bonds, which had rallied in recent weeks. The yield on the benchmark 10-year T-note jumped to 4.08% from Friday's two-month low of 4%.

The Treasury market may have been riled by warnings from three watchdog groups that mounting federal borrowing is a threat to the health of the U.S. economy.

"The coming decade is likely to rank as the most fiscally irresponsible in our nation's history," said Robert Bixby, executive director of the nonpartisan Concord Coalition.

The coalition, along with the left-leaning Center on Budget and Policy Priorities and the business-backed Committee for Economic Development, said that official budget projections masked the extent to which the fiscal outlook had deteriorated.

Whereas the Congressional Budget Office forecasts deficits totaling $1.4 trillion in the next 10 years, the groups projected a $5-trillion toll, assuming recent tax cuts are made permanent.

Among Monday's market highlights:

* Tech shares bouncing back after last week's selling included Intel, up $1.10 to $28.37; International Rectifier, up $2.03 to $39.18; Novellus Systems, up $1.27 to $34.89; and Ixia, up 70 cents to $10.79.

* In the Internet sector, EBay rose $1.43 to $55.65, Netease .com surged $5.46 to $59.39, and United Online gained $1.95 to $37.10.

* Stocks of health maintenance organizations attracted buyers. Oxford Health gained $2.65 to $41.15, and WellPoint Health rose $1.73 to $76.32.

* Real estate investment trust shares rallied. Mack Cali rose 70 cents to $38.90, Kilroy Realty jumped 72 cents to $29, and Vornado Realty gained 45 cents to $47.95.

Market Roundup, C10-11

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