NEW YORK – Stocks concluded a roller-coaster day with a dramatic late rally Wednesday, with the Dow Jones industrial average snagging its biggest gain in 11 weeks, as investors prowled for cheap picks after days of concerns over loose accounting practices and mounting corporate debt.
The blue-chip Dow Jones industrial average surged 196.03 points, or 2.01 percent, to 9,941.17, notching its biggest percentage gain since Dec. 5. The Nasdaq Composite Index advanced 24.97 points, or 1.43 percent, to 1,775.58, after dropping more than 1.2 percent earlier in the day. The broad Standard & Poor's 500 Index tacked on a 14.64-point gain, up 1.35 percent, to end at 1,097.98.
After a dismal midday free fall during which technology shares sank to their lowest level since early November, investors flocked to safe havens like aluminum giant Alcoa Inc. and nabbed battered stocks like wireless operator Nextel Communications Inc. after the broad market suffered three straight losing sessions.
"Saying that this is a volatile and uncertain market is an understatement," said Allen Ashcroft, a fund manager for Allied Investment Advisors. "We're praying a lot."
Concerns over the health of corporate balance sheets still dogged stocks like software maker Computer Associates International Inc., which tumbled after becoming the latest firm to be slammed by accounting fears. AES Corp. shares deepened their slump after rating service Moody's warned it may downgrade the utility's debt.
Traders pinned some of the late gains on short covering. Short sellers, investors who sold borrowed stock and hoped to buy it back later at a lower price, covered their short positions and bought shares as the market began to climb toward the closing bell.
Trading was active, with 1.42 billion shares changing hands on the New York Stock Exchange, and 1.9 billion shares on the Nasdaq. More than 3 stocks rose for every 2 that fell on the Big Board, while 4 climbed for every 3 that dropped on the Nasdaq.
Manufacturing and defense giant Honeywell International Inc. jumped $1.85 to $34.50, boosting the blue-chip Dow. Honeywell named David Cote, formerly chief executive of aerospace and automotive group TRW Inc., as its new chief executive and chairman and reaffirmed earlier guidance for 2002 on Tuesday.
Traditional safe havens also propped up the Dow as investors sought shelter amid questions over accounting practices. Aluminum giant Alcoa rose $1.36 to $36.61. Drug giant Merck & Co. jumped $2.01 to $61.26. Diversified manufacturer Minnesota Mining & Manufacturing Co. climbed $3.73 to $117.10.
"Any company that is tainted by credit problems or accounting problems is being looked on with suspicion," said Stanley Nabi, managing director at Credit Suisse Asset Management, which oversees about $269 billion worldwide. "But any company with some kind of purity to it seems to be acting very well."
Computer Associates, down $4.40 at $20.91, was the NYSE's fourth-most active issue after reports the U.S. Attorney's office was investigating the world's No. 4 computer software maker's balance sheets.
Newsday reported the Federal Bureau of Investigation and the U.S. Attorney's office are investigating whether the company violated federal criminal fraud laws.
The company said in a statement it had not been contacted by the authorities regarding any investigation and did not know what, if anything, was being investigated.
General Electric Co. became the latest company to address these concerns by saying it will change some accounting methods to make results more clear to investors. The Dow component rose $1.17 to $37.57.
AES Corp. fell 50 cents, or 10.53 percent, to $4.25 after Moody's said it may downgrade the debt-laden utility's ratings. The warning follows a sharp decline after credit rating agency Fitch Ratings downgraded AES Corp.'s debt and convertible securities last Thursday.
Worries about credit ratings have dogged utility and telecommunications companies' stocks on fears a credit crunch could drag firms into bankruptcy.
"There are still some land mines out there and it's a tough market to navigate," said Peter Coolidge, senior equity trader for Brean Murray & Co.
Media giant AOL Time Warner dropped $1.32 to $24.20 after Lehman Brothers analyst Holly Becker cut her rating on the stock to "market perform" from "buy" based on her new, lower growth projections for the AOL unit.
Sprint PCS Group, the nation's fourth-largest wireless operator, fell 35 cents to $8.40 and ranked as the most active on the Big Board. Investors continued to worry about parent Sprint Corp.'s ability to find buyers for its short-term debt.
Pharmaceutical Resources Inc. lost $9.11, or more than 36 percent, to $16.10 after saying a rival firm had won permission from U.S. regulators to sell a generic form of a drug to treat weight loss.
But Nextel, the nation's No. 5 wireless operator, bounced back after tumbling to an all-time low a day ago on news a unit will take a pretax noncash restructuring charge of $1 billion to $2 billion in 2001. Its stock surged 83 cents, or more than 23 percent, to $4.38.
The Russell 2000 index, the barometer of smaller company stocks, rose 7.27, or 1.6 percent, to 467.25.
Overseas, markets were mostly lower Wednesday. Japan's Nikkei stock average finished down 0.1 percent. In Europe, France's CAC-40 stumbled 0.4 percent, and Britain's FT-SE 100 fell 1.3 percent, but Germany's DAX index gained 0.3 percent.
Reuters and the Associated Press contributed to this report.