NEW YORK -- The Nasdaq surges more than 41 percent over seven weeks and then drops back nearly 10 percent in just five days.
The Dow industrials climb 20 percent over a two-month period before falling 4 percent in six sessions.
After a protracted slump on Wall Street, it might look like the market moved a little too high too fast during its spring rally. It also might seem, given the still-uncertain outlook for earnings, that many investors didn't learn enough from the painful lessons of the past two years.
But some analysts, looking behind the percentages, find reasons to believe investors are right to be buying at their recent clip.
"It's part of the process of rebuilding confidence in the market. It's just natural to have the upswings and the profit-taking and backing and filling that we've seen," said Jim Herrick, managing director of trading for Robert W. Baird & Co. in Milwaukee.
There was plenty of backing and filling in the market this past week, which saw the Dow tumble 166 points Wednesday and then recover a combined 117 on Thursday and Friday. The Nasdaq suffered hefty 75- and 91-point declines Tuesday and Wednesday, but recouped 65 the next two days.
More retrenching -- perhaps a lot of retrenching -- is anticipated because the market is just starting warnings season, the period when companies that are expecting disappointing earnings release their forecasts. Those predictions and the release of actual second-quarter results starting in early to mid-July are likely to shake investors' resolve and set off some substantial selling.
But analysts, still believing the worst is over on Wall Street, don't expect the declines to be serious.
"We're quite sure that the bear market ended the beginning of April," said Eugene Mintz, financial markets analyst at Brown Brothers Harriman & Co. Like other analysts, Mintz noted that investors have a lot of money and they are now intent on buying, where a few months ago their inclination was to sell.
If the market's handling of a warning this past week from Sun Microsystems Inc. is an indicator, it should in the end be able to cope with bad earnings news.
Sun said Tuesday that the revenue in its fourth quarter, which ends June 30, could fall as much as 24 percent from a year ago, while per-share earnings would come to between 2 and 4 cents, compared with the 6 cents Wall Street expected.
Wall Street initially was unnerved by the news, leading to Wednesday's big drop. But by Thursday the market had a moderate rebound and it continued its advance Friday despite dim profit outlooks from DuPont Co. and BellSouth Corp.
What the market has going for it is its tendency to be a leading indicator for earnings and the economy, rising six to nine months before a significant improvement in fundamentals becomes a reality.
With the Federal Reserve widely expected to lower interest rates for the sixth time this year when it meets in late June, the market is likely to advance on expectations of healthier profits in the first quarter of 2002.
Still, analysts aren't predicting the market will rally in the near future at the pace it enjoyed during the spring.
"As we come out of difficult times in the stock market, you will have these surges again and plateau for a while," said Joseph Battipaglia, chief investment strategist at Gruntal & Co.
"There's a tug of war," he said. "On one hand, the Fed is easing interest rates, and there's news on the economy that speaks to something better than recession. On the other hand, there's earnings season and companies' confessionals and analysts downgrading their investment ratings. It makes the market volatile in the short term."
The Dow ended the week little changed, falling 14.96 or 0.1 percent, to 10,990.41 after a gain of 78.47 Friday.
The Nasdaq fell 101.59 or 4.5 percent for the week after rising 38.95 Friday to 2,149.44. The Standard & Poor's 500 index had a 17.22 or 1.3 percent loss for the week, rising 4.85 Friday to 1,260.67.
The Russell 2000 index fell 6.90 or 1.4 percent for the week after gaining 5.22 Friday to close at 501.72.
The Wilshire Associates Equity Index -- which represents the combined market value of all New York Stock Exchange, American Stock Exchange and Nasdaq issues -- ended the week at $11.671 trillion, off $178.420 billion for the week. A year ago the index was $13.734 trillion.
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