Dow Up 41.60 as Bid for Nekoosa Lifts Confidence

The stock market surged higher Tuesday in a broad-based rally that analysts said was triggered by news of a $3.18-billion takeover offer for Great Northern Nekoosa Corp.

The Dow Jones average of 30 industrials jumped 41.60 to 2,645.08. The blue chip indicator had declined in five straight sessions last week and recovered only slightly Monday.

Wall Street analysts said the $58-a-share tender offer by Georgia Pacific Corp. for Norwalk, Conn.-based paper maker Great Northern Nekoosa helped restore market players’ confidence about the prospects for deal making.

Takeover speculation has helped buoy stock prices during the market’s rise this year.

But Wall Street’s confidence was shaken badly after the collapse of proposed deals involving UAL Corp. and AMR Corp. The failure of a UAL employee-management group to get financing for its planned $6.75-billion buyout of the company helped trigger the Oct. 13 stock plunge, which in turn led to the scuttling of developer Donald Trump’s $7-billion offer for AMR.

“The paper offer was helpful because it shows that deals are still going to be done or at least are attempting to be done,” said Brad Weeks, head of equity trading for Donaldson, Lufkin & Jenrette.

Advancing issues outnumbered decliners by about 13 to 5 in nationwide trading of New York Stock Exchange-listed stocks, with 1,120 issues up, 435 down and 407 unchanged.

Big Board volume totaled 176.10 million shares, up from 126.63 million Monday.

The market’s ability to sustain the rally throughout the session surprised many analysts, who expected investor pessimism to wipe out early gains once the initial euphoria had worn off.

“I don’t know if there was any real good news, but there was a clear absence of bad news today. It was a good, old-fashioned technical rally,” said Thomas Walsh, head of equity trading for Nikko Securities International.

Analysts called the rally orderly, without the sharp price gyrations evident in some recent sessions.

New government data suggesting that the pace of economic growth is slowing further had little impact on the stock market.

The Commerce Department reported the index of leading indicators, its chief economic forecasting gauge, rose 0.2% in September for its second consecutive monthly advance. But the index was revised upward to 0.5% for August from a 0.3% gain reported earlier.

The government also reported that sales of new houses in September fell 14%, the steepest decline in nearly eight years, as interest rates rose.

Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 208.461 million shares.

Great Northern Nekoosa led the NYSE most active list, rising 20 1/8 to 62 7/8.

Chevron, rumored to be a takeover candidate, climbed 2, to 68 1/2; Chase Manhattan rose 1/2, to 36 1/2, and Philip Morris advanced 7/8, to 43.

Stock prices on the Tokyo Stock Exchange rebounded sharply in active trading Tuesday, ending its second straight losing session.

The Nikkei average of 225 selected issues, which fell 109.85 Monday, rose 132.00, to 35,549.44.

In London, shares closed at the day’s highs, buoyed by early gains on Wall Street and by news that the British government plans to drop its “golden share” in car maker Jaguar. That announcement, clearing the way for a full takeover bid, prompted new interest in other potential takeover stocks.

The Financial Times 100-share index closed up 30.4 at 2,142.6.

Credit

Bond prices finished mixed Tuesday, as short-term Treasury issues lost ground while longer-term securities posted modest gains amid uncertainty about the pace of economic growth.

The Treasury’s bellwether 30-year bond rose 7/32 point, or $2.20 per $1,000 in face value. Its yield fell to 7.90% from 7.92% late Monday.

In the secondary market for Treasury securities, prices of short-term government issues lost 1/32 point, intermediate maturities were mostly unchanged and long-term issues rose as much as 5/16 point, according to Telerate Inc., a financial data service.

The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 8.875%, up from 8.75% late Monday.

Currency

The U.S. dollar rose Tuesday against all major currencies except the Canadian dollar in dull European trading. Gold prices were mixed.

Currency dealers said news of firmer prices on Wall Street and a scheduled summit between U.S. President George Bush and Soviet leader Mikhail S. Gorbachev in early December helped pushed the dollar higher.

But they said trading was relatively dull as dealers awaited this week’s October U.S. unemployment report, which should shed more light on the direction of the American economy.

In Tokyo, where trading ends before Europe’s business day begins, the dollar closed at 142.15 yen, down from 142.17. In London, it closed higher at 142.69 yen.

Meanwhile, the British pound was firmer against most currencies. It plunged Friday after Chancellor of the Exchequer Nigel Lawson resigned late Thursday. But it was slightly lower against the dollar.

Remarks by Lawson’s successor, John Major, in the House of Commons on Tuesday inspired some confidence, when he said he intended to follow current policies, fight inflation and maintain a firm pound, dealers said.

In London, one British pound cost $1.5775 late Tuesday, cheaper than Monday’s $1.5785.

Commodities

Copper futures rallied on news that workers at two Chilean mines voted to strike later this week, but precious metals resumed their long-term downtrend.

The Exxon-owned mines make up a large portion of the Chilean copper industry, producing a total 125,000 metric tons of fine copper per year.

If the wage negotiations collapse, workers are to walk out at midnight tonight.

December copper futures traded on the New York Commodity Exchange closed with a gain of 1.20 cents at 114.00 cents per pound after running into solid speculative selling resistance just below the 115.00-cent mark.

Unexpected strength in the dollar pressured all New York precious metals markets.

COMEX December gold futures closed $3.20 per ounce lower at $377.60, with December silver ending down 6.5 cents at $5.218.