NEW YORK -- After eight long, painful months, the Dow Jones industrials returned to levels not seen since September, and every indication is small investors -- however cautiously -- are helping it happen.
From Wall Street to Main Street, optimism is growing that the days of incessant selloffs are coming to an end. The reasons: encouraging economic data, a more stable stock market and five interest rate cuts by the Federal Reserve this year. But the enthusiasm is restrained and euphoria is nowhere to be found.
"I think the worst is over, but that doesn't mean it's going to go straight up," said Ari Pramudji, 35, a Houston lawyer, who recently returned to buying stocks.
"I'm buying again, but I'm more apprehensive and my priorities have changed. Right now I'm interested in capital preservation. Back then, I was looking to double my money."
The Dow closed Wednesday at 11,215.92, rising 342.95 for its first finish above 11,000 since Sept. 14. Technology stocks also rose, notching a nearly 4 percent gain on the Nasdaq composite index. The advances came a day after an expected rate cut by the Federal Reserve and indications that more reductions were possible.
"The market, the institutions are getting more comfortable," said Robert Harrington, head of listed equity trading at UBS Warburg. "We're probably a quarter away from seeing better corporate results, and they're more willing to commit money on anticipation that the second half is going to be better."
On most days, it's the big institutions and mutual funds that do most of the buying, but Wednesday was different.
More money than usual went into trades of less than 10,000 shares -- an indication that individual investors were doing much of the buying. Institutions and mutual funds are more likely to buy in blocks of more than 10,000 shares.
The Dow recorded $517 million in inflows from trades of less than 10,000 shares, compared with $137 million of inflows for larger-size transactions, according to Birinyi Associates, which monitors trade activity.
"This isn't really what we normally see. It gives us the indication that people who have taken money out of the market in the last couple of months may have come back in today," said Paul Hickey, a Birinyi analyst.
Not everyone is convinced that now is the time to buy stocks.
The Dow's rise Wednesday, while noteworthy, reflected the growth of a very select group of stocks: the 30 issues determined by the editors of The Wall Street Journal as most representative of the market.
The Nasdaq is still more than 50 percent off its all-time closing high of 5,048.62 reached in March 2000, and the Standard & Poor's index remains 15 percent below its best finish of 1,527.46, also from March 2000.
The markets are also likely to give back some of Wednesday's gains in coming days as part of the normal fluctuations and cycles found on Wall Street.
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
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