STOCKS : Good Signs on Oil, Gulf Push Dow Up 51.74
The stock market took a giant step forward on Monday, as investors reacted to the possibility of lower interest rates, falling oil prices and an easing of tensions in the Persian Gulf.
The Dow Jones industrial index jumped 51.74 points, or 2.1%, to close at 2,540.35, while broader measures of market strength also showed strong gains. In all, U.S. investors earned roughly $52.6 billion in paper profits on Monday, according to Wilshire Associates, a Los Angeles investment house that measures the value of U.S. common stocks.
Monday’s gain followed a 44.80-point Dow rise Friday. However, analysts remain divided on the market’s future. Some believe that the strong gains of the past two sessions signal the end of the slide that started last August. Others say this is just a good day in an otherwise bad market. And some believe that it is just too soon to tell.
Although investors are expressing more optimism about a wide variety of economic and political prospects, the main reason for stocks’ strong showing was the widespread belief that the Federal Reserve will move to lower interest rates this week, experts said.
The reason: Recently released producer price figures indicated a slowing economy at a time when oil prices seem to be stabilizing. The price of crude oil for December delivery fell $2.02 a barrel Monday to close at $31.87 on the New York Mercantile Exchange. This combination has reduced near-term inflation worries and may help spur the Federal Reserve to ease credit quickly and decisively.
Investors believe that lower interest rates would prove beneficial for both the economy and corporate earnings, market experts said.
“The lowering of interest rates makes investors think that if we do have a recession, it won’t be a particularly bad one,” Johnson added. If the Fed does lower rates soon, some expect the market to continue climbing.
“I think this could be the beginning of a significant turnaround in the market,” said Eugene E. Peroni Jr., director of technical research at Janney Montgomery Scott in Philadelphia.
“The market is historically more concerned with economic factors than political and military ones. Now the focus is more on interest rates and what they can do for the economy and for future earnings.”
The bond market was closed Monday in observance of Veteran’s Day.
Among market highlights:
* Financial stocks led the market because of the expectations of lower rates and the perception that the issues have fallen to bargain levels. Some of the biggest gainers included First Interstate, which jumped 1 1/8 to 20; Wells Fargo, up 2 3/8 to 51 3/4; BankAmerica, up 1 1/2 to 23 3/4, and Citicorp, up 1 to 13 1/4.
Among S&Ls;, Great Western soared 1 1/8 to 11 1/4, CalFed jumped 1/2 to 3 3/4, and Ahmanson rose 1 to 14 1/4. The two strongest percentage-gainers in the Dow index were financial stocks as well: American Express, up 2 to 21 5/8, and Primerica, up 1 1/4 to 20 1/2.
* Technology stocks, often viewed as a proxy for the broad economy, also were strong. Microsoft jumped 4 1/8 to 68 7/8, AST Research rose 2 to 26, IBM gained 2 3/4 to 113, Compaq rose 2 1/4 to 51 3/8 and Advanced Logic gained 3/4 to 8.
* Airline stocks rebounded from their recent sharp slump. AMR, parent of American Airlines, soared 1 7/8 to 48 1/8, Delta rose 2 to 57 3/8 and USAir rocketed 1 3/8 to 15.
* Among other blue-chip stocks, Eastman Kodak was up 3/4 to 41 1/2, General Electric rose 1 5/8 to 55 3/8, and Merck closed at 82 3/8, up 1 7/8.
Overall, gaining issues outpaced decliners by about a 3-to-1 margin, with 161.39 million shares changing hands on the New York Stock Exchange, compared to 145.16 million on Friday.
The New York Stock Exchange composite index climbed 2.90 to 174.07, or 1.7%. The American Stock Exchange market value index rose 3.75 to 294.78, or 1.3%, and the NASDAQ over-the-counter composite jumped 9.51 to 351.46, a 2.8% rise.
Stock prices also climbed in foreign markets. In Frankfurt, the DAX 30-share index rose 20.75 to 1,402.24. And in London, the Financial Times index gained 11.3, closing at 2,051.9.
The Tokyo market was closed Monday for Emperor Akihito’s enthronement. In today’s trading, prices were up sharply at midday, with the Nikkei 225-share average gaining 773.04 points to 23,704.84.
CURRENCY Hope for Rate Drop Depresses the Dollar The dollar fell broadly in sleepy trading on world currency markets Monday, largely in anticipation that the Federal Reserve would lower interest rates this week.
Trading was extremely light, with many bank trading floors closed for Veterans Day. Lack of news indicating increased volatility in the Middle East kept investors focused on what the Fed might do after Tuesday’s meeting of its policy committee.
Also driving down the dollar’s value against foreign currencies was a slide in oil futures services.
Traders were discouraged by a $2.02 drop in the December contract for light, sweet crude to $31.87 per barrel.
The oil drop added strength to the Japanese yen because traders read it as a favorable sign for Japan’s oil-dependent economy.
The dollar fell against the yen in New York, closing at 128.30 yen, down from Friday’s 129.70. In overnight trading in Tokyo, the dollar traded at 130.50 yen, unchanged from Friday’s close, and in London, it fell to 128.80 yen.
The British pound also strengthened to $1.9660 from $1.9655 late Friday. In earlier London trading, the British pound traded at $1.9627, compared to $1.9670 late Friday.
COMMODITIES War Worries Abate; Metals, Oil Decline
Prices of gold and silver futures, following the lead of oil futures, declined Monday on a day of light trading highlighted by a consensus that war in the Persian Gulf is not imminent. On other commodities markets, soybean futures rose and grains fell.
Gold settled on New York’s Commodity Exchange $4.10 to $2.50 lower, with November at $382.30 an ounce; silver settled 4.4 to 3.1 cents lower, with November at $4.19 an ounce.
Prices of oil futures on the New York Mercantile Exchange fell after Democratic lawmakers remained adamant that President Bush must get the support of Congress before attacking Iraq or seeking to liberate Kuwait.
Light sweet crude settled $2.02 to 17 cents lower, with December at $31.87 a barrel; heating oil settled 3.83 to 1.83 cents lower, with December at 86.52 cents a gallon; unleaded gasoline settled 4.70 to 3 cents lower, with December at 83.53 cents a gallon.
Soybean futures prices rallied from sharp weekend losses on the Chicago Board of Trade as commercial buyers began to cash in on the oversold product.
Soybean futures prices slipped to an 8 1/2-month low on Friday, after an Agriculture Department report that indicated a larger than expected supply of soybeans.
Market Roundup, D10
