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Wall Street Voices Concern That New Report Will Damage Market

By Thomas S. Mulligan

A late-day rally partly reversed an early sell-off in technology shares Monday but failed to ease fears that an inflation report due out Tuesday morning could cause more damage to beleaguered markets.

Wall Street is worried that the September consumer inflation report, like the wholesale inflation report that was issued Friday, will give Federal Reserve Chairman Alan Greenspan more evidence to justify raising short-term interest rates again when the Fed meets Nov. 16.

Bracing for the report, investors pushed bond yields up Monday and sent stocks lower overall. But the Nasdaq composite index cut a 99-point loss in half in the final hour to close down 42.68 points, or 1.6 percent, at 2,689.15.

The Dow Jones industrial average, meanwhile, rode a late-afternoon surge to close up 96.57 points, or one percent, at 10,116.28. The Dow repeatedly dipped below the 10,000 mark -- an important psychological milestone -- during the afternoon before finally rallying above it.

Still, falling stocks outnumbered winners by nearly 2-to-1 on the New York Stock Exchange and on Nasdaq, continuing a trend that has alarmed analysts for months. But after last week’s market losses -- the worst for the Dow in 10 years -- some traders were surprised the damage wasn’t worse Monday.

The selling also continued in the bond market, driving yields up across the board. The 30-year Treasury bond ended at 6.32 percent, up from 6.26 percent Friday and matching last Thursday’s two-year high.

The Dow was buoyed by big gains in J.P. Morgan, up $7.31 to $113, and American Express Co., up $2.75 to $137.38. Beaten-down financial shares rallied broadly after leaders such as Morgan, Citigroup and Bank of America reported strong third-quarter earnings.

Another factor in the afternoon rally was a bullish statement from influential Goldman Sachs analyst Abby Joseph Cohen, who said that inflation fears are overdone and that the Standard & Poor’s 500 index is actually five percent undervalued, given strong corporate earnings.

Nonetheless, if the September consumer inflation figure comes in much higher than the consensus forecast of a 0.4 percent increase.