Wall Street saw corrections Thursday after turning upside down Wednesday.
The Dow Jones industrial average soared 320 points. But the NASDAQ tumbled 124 points, extending a three-day loss that pushed the technology-heavy index within a whisker of a correction five days after reaching a record high. The NASDAQ was 9.2 percent below its record close last Friday.Amid an anything-goes atmosphere for investors, the reversal of roles for the two main stock market indexes was, nevertheless, seen as bizarre by stock traders and mutual fund managers.
The Dow and NASDAQ this year have routinely gone in wildly different directions day after day. But it more often has been the Dow that has drifted down while the NASDAQ achieved new heights. This was different: The NASDAQ fell 124.01, or 2.6 percent, to close at 4582.62. The Dow's 320.17-point gain pushed the 30-stock index of Blue Chip stocks to 10,131.41.
"That's quite a divergence -- and it's going in the opposite direction of what I'd gotten used to," said Eric Efron, manager of the USAA Aggressive Growth fund in San Antonio.
Computer-related companies led a Thursday-morning correction that saw the NASDAQ up 1.8 percent to 4662.76. The Standard & Poor's 500 Index advanced 1.1 percent to 1407.14 Thursday morning, with the Dow up slightly, 0.8 percent, to 10,280.04.
The NASDAQ's Wednesday retreat brought the index's total losses this week to 401 points. There was no bad news to trigger the index's decline, which money managers attributed to panic selling by investors seeking to grab profits in stocks increasingly perceived as overvalued.
Investment specialists say much of the selling is occurring among day traders and aggressive retail investors whose buy and sell orders have greatly increased the volatility of the current markets.
For example, biotechnology stocks were hammered -- some say irrationally -- on Tuesday after President Clinton questioned efforts by some biotech companies to guard their discoveries in decoding the human genome.
Those stocks -- PE Corp.'s Celera Genomics Group, Millennium Pharmaceuticals and Incyte Pharmaceuticals Inc. -- stumbled again, though the Amex Biotechnology index staged a rebound and rose 2.1 percent.
"The NASDAQ has had this tremendous rise this year," said Jon Burnham, manager of the $205 million Burnham fund. "People get scared -- they've made a lot of money and say, 'I've got to get out.' "
During Wednesday's Dow-on-top shift, money streamed out of risky technology start-up companies and poured into the big companies in the Dow.
"The stocks that were rocketing today were your traditional names," said Michael Ryan, head of trading for State Street Research & Management Co. "People ring up profits (in the technology sector) and before you know it, they are throwing money into these Dow stocks."
More than three stocks rose for every two that fell on the New York Stock Exchange. Gains were posted by Du Pont, Coca-Cola Co., J.P. Morgan and numerous large pharmaceutical companies.
John Ballen, president of MFS Investment Management in Boston, said the Dow's sharp rise was a classic "bear-market rally." The Dow is down nearly 12 percent this year despite the rally.
At a time of "relentless selling pressure" in the Dow, Ballen said "it doesn't take much in terms of moving those stocks dramatically on the upside. You get the most violent rallies in bear markets."
But investors were also heartened by renewed interest in a broader array of stocks, not just technology. If that trend continues, some said, the one-day rally might be sustained.
While opinions vary about what is going on in the stock market, or which way it is headed, most agree it has been a wild ride, particularly in the Nasdaq.
"We're holding on to the roller coaster seat," said USAA's Efron. The Nasdaq, he said, "goes through excesses of optimism and excesses of gloom. We try to focus on the long-term, and we think long-term prospects of these companies are very good."