Bargain Hunters Boost Stocks

Stocks were swept higher Wednesday as buyers waded back into the market after Tuesday’s big washout. But investors remained jittery amid persistent worries about the strength of the U.S. economy.

Just a day earlier, news of weak manufacturing activity drove the Standard & Poor’s 500 index to its biggest one-day percentage loss since the aftermath of the Sept. 11 attacks. The sharp drop in prices lured bargain hunters, helping the market post its biggest one-day gain since Aug. 19.

“We’ve got a lot of stocks that have turned around and traded a little bit higher after the sell-off,� said Tim Smalls, senior equity trader at SG Cowen. “It’s not with any strong conviction; it’s just that you see a little bit of bottom fishing.�

There was good news late in the day from car makers, who reported that August was a another red-hot month for U.S. auto sales.

But investors were on edge in anticipation of a mid-quarter update due today from tech heavyweight Intel and key U.S. labor market data due Friday. Wall Street is concerned that a tepid economic rebound will crimp corporate profits, traders said.

The S&P; 500 climbed 15.38 points, or 1.8%, to 893.40, after plunging 4.2% on Tuesday. The Dow Jones industrials rose 117.07 points, or 1.4%, to 8,425.12. The tech-laden Nasdaq composite index gained 28.47 points, or 2.3%, to 1,292.31.

Winners outnumbered losers by 2 to 1 on the New York Stock Exchange and by 3 to 2 on Nasdaq. Trading remained on the light side.

The possibility of a U.S. military strike against Iraq was on investors’ minds. President Bush said he would call on world leaders next week at the United Nations to recognize that Iraqi President Saddam Hussein is “stiffing the world� by developing weapons of mass destruction and that the United States must act.

“There is some optimism that President Bush isn’t going to act unilaterally on going into Iraq,� said Todd Clark, head of listed trading at Wells Fargo Securities. “To the extent that we have a well-thought-out policy is probably making the markets feel a little better.�

Bargain hunters stepped in to snap up shares of telecom equipment makers, and chip-related companies staged a rebound despite soggy results from National Semiconductor and more gloomy analyst calls on Intel.

Lucent Technologies surged 24 cents, or 13%, to $2.03, while rival Nortel Networks jumped 17 cents, or 17%, to $1.18.

The Amex North American telecom index rose 4.1%.

SBC Communications helped lift the Dow with a gain of $1.20 to $24.30.

Intel, the world’s largest chip maker, climbed 25 cents to $16.11, after sinking 5% on Tuesday. Investment banks Merrill Lynch and Credit Suisse First Boston cut their 2002 and 2003 earnings-per-share forecasts in advance of the company’s financial update today, adding to Tuesday’s bearish call from Lehman Bros.

Custom chip maker LSI Logic rose 74 cents, or 11%, to $7.70. The company unveiled its biggest new-product push in eight years and stood by earlier guidance that third-quarter revenue will rise about 10% from the second quarter.

National Semi posted results that met diminished forecasts, hurt by a slow personal computer market. Despite the soft results, its shares reversed early losses to rise 23 cents to $15.20.

The dollar rose against the euro and the Japanese yen. Bond yields were little changed.

In commodities trading, oil ticked up 48 cents to $28.27 a barrel after falling 4% on Tuesday. Gold rose $1.50 to $314.90 an ounce.

In other highlights Wednesday:

* UAL, parent of United Airlines, rose after Glenn Tilton, its new chief executive, met with union leaders and said bankruptcy is “not a foregone conclusion.� UAL shares surged 56 cents, or 19%, to $3.50.

* Biotechnology stocks rose. Amgen gained $1.18 to $44.12, and Biogen added $1.30 to $33. The Nasdaq biotech index rose 3.3%.

* After the news of higher auto sales, GM rose 20 cents to $45.75, Ford rose 11 cents to $11.05, and DaimlerChrysler gained $1.65 to $41.52.

* Cigna fell $2.65 to $80 the day after it said it would take a $720-million third-quarter charge to strengthen its reserves for reinsurance contracts. On Wednesday, Standard & Poor’s said it may reduce Cigna’s A+ credit rating.

* Hershey Foods slid after a state judge put the sale of the company on hold, delivering a setback to a planned auction. The candy maker fell $3.09 to $72.51.

* Japanese stocks continued to struggle. The Nikkei average finished down 141.95 points, or 1.5%, at 9,075.09--its lowest close since Aug. 17, 1983.