Wall Street recovers as investors return

Heartened by last week's late rally and by rising markets in Japan and Europe, investors waded cautiously back into the New York…

Heartened by last week's late rally and by rising markets in Japan and Europe, investors waded cautiously back into the New York Stock Exchange yesterday. By mid morning the Dow Jones Industrial Average had soared by more than 200 points, taking it well out of the bear territory with which it flirted on Thursday.

There were hopes on Wall Street that the market was in for a significant upturn following a period of steady erosion that pushed the technology-rich Nasdaq Composite and the broad-based S&P 500 indices into bear territory, defined as a 20 per cent drop from a market's peak.

The blue-chip Dow index closed at 9,688.11 last night, up 1.93 per cent, while the Nasdaq was down 0.54 per cent at 1,918.34.

The US market still has a long way to go to recover the 1,500 points lost in the 10-day period ending Thursday, when the Dow finished just 11 points above bear territory at 9,389.48. By yesterday afternoon, it had recovered one-third of that loss.

READ MORE

Optimism on Wall Street was helped by some upbeat comments about economic prospects for the remainder of the year. The president of the Richmond Federal Bank, Mr Alfred Broaddus, said yesterday that the US economy remained "fundamentally quite strong" and forecast that growth for 2001 would be 2-2.5 per cent.

Two Wall Street houses trimmed their year-end targets for the S&P 500, the benchmark for judging performance of professional investors and mutual funds, but still predicted the index would end higher in 2001. Lehman Brothers reduced its year-end target for the S&P 500 to 1,400 from 1,600, while JP Morgan cut its target to 1,300 from 1,400.

The run of bad news from technology companies continued yesterday with Conexant Systems announcing that it would cut 1,500 jobs, or 17.8 per cent of its workforce.

The reductions are the first at a major chip supplier to such broad-based and already hardhit companies as Cisco Systems, Lucent Technologies and Nortel Networks.

The big pharmaceutical and medical supplies company, Johnson & Johnson was reported yesterday to be in talks to buy speciality pharmaceutical maker Alza Corporation for as much as $12 billion (€13.4 billion) to gain an attention-deficit disorder treatment and timed-release medicines. Both companies have invested in the Republic.