Stocks leap, with the Dow up 108 points Opportunistic buying lifts index back from 70-point decline; Which way now?; Some expect new highs, but others predict further weakness; Wall Street

The stock market looked like its old self yesterday, racing higher as blue chip stocks pushed the Dow Jones industrial average up more than 100 points.

The Dow, -- the closely watched index of 30 large companies -- jumped 108.70 points, or 1.41 percent, to 7,803.36, to spring back from Friday's 247.37-point drubbing.


The Dow began falling just after the opening bell yesterday and continued its decline past 1 p.m., when it hit bottom -- down more than 70 points. Then it rallied, driven by buying in such stalwarts as International Business Machines Corp., which finished up $4.0625 to $104; General Electric Co., up $2.625 to $66; and Exxon Corp., up $3.1875 to $62.1875. All three stocks had declined Friday.

"When you get big, visible companies like that under attack, these are opportunities," said Richard Cripps, market strategist with Baltimore-based Legg Mason Inc.


There were plenty of losers, too.

Hewlett-Packard Co. fell $2.31 to $63.75, after the Palo Alto, Calif.-based electronics maker's quarterly profit did not meet analysts' estimates. Gillette Co. dropped for the second day in a row, by $2.875 to $83, and Dow Chemical Co. fell $3, to $89, after it was found liable on all counts in the first phase of a lawsuit over silicone breast implants. The Standard & Poor's 500 stock index rose 11.68 points, or 1.30 percent, to close at 912.49. The Nasdaq composite index added 7.49 points to 1,569.52.

Among broad market indexes, the Russell 2,000 index of small capitalization stocks added 0.15 to 408.73; the Wilshire 5,000 index jumped 77.21 to 8,708.58; the American Stock Exchange composite index advanced 0.92 to 634.59; and the S&P; 400 mid-cap index slid 0.25 to 307.10.

Experts are mixed on which way the market is heading. It has taken a wild ride lower after hitting a high of 8,259 Aug. 6. Some expect it to slip further because it has risen so quickly this year.

"I don't think it [the decline] is over yet," said Richard McCabe, chief market analyst with New York-based Merrill Lynch & Co.

"I know we got a bounce today, but it was really a Dow Jones rally," he said. "This bounce should last a day or two, but it is a temporary lift."

But McCabe said this "pull-back should not be the beginning of a bear market or of a major decline. It is a temporary reduction."

Judith Jones, senior managing director of Cleveland-based Key Asset Management, said the market is "correcting" because many large stocks had become too expensive.


"The market has gone very far, very fast," she said. "July was just gangbusters. It is just a natural reaction for the market to sell off a little."

Others see it differently.

"Nothing has changed, the environment is still favorable for the equity market," said Peter Canelo, U.S. investment strategist with Morgan Stanley Dean Witter in New York. "We should see a new high I think by the end of the quarter."

But like other experts, Canelo sees small stocks and housing and auto stocks -- known as cyclicals -- gaining in popularity at the expense of 50 big blue chips dubbed, the "Nifty Fifty."

"I think there is a shift in rotation and probably more of a shift toward smaller capitalizations," Canelo said.

"The dollar is up and it is going to make a difference in the third quarter" profits.


Jones has been selling shares she owns in many large companies such as Microsoft Corp. and Intel Corp. She is buying smaller technology companies such as Santa Clara, Calif.-based Bay Networks Inc.

"We think the mid-cap area has lagged the big-cap market," Jones said. "They seem to have more attractive valuations."

Pub Date: 8/19/97