Worldwide Surge : Rallies in the U.S., London, Tokyo End Roller-Coaster Week on a High Note
Investors around the world careened up and down on a roller-coaster ride this week, as markets in the United States, Tokyo and London surged upward Friday, recovering part of the losses suffered early in the week here and in Japan.
“It was a wild week,” said Trude Latimer, chief market strategist at Josephthal, Lyon & Ross. “The bears were getting the upper hand, but they went into hiding the last two days.”
Here’s how world markets finished on Friday:
* After Tokyo’s Nikkei average tumbled 11% between Monday and Thursday, the battered market recovered with one of its biggest rallies ever on Friday. At the week’s closing, the 225-share Nikkei average rose 1,252.51 points, or 7.6%, to close at 17,850.66, making up most of its losses for the week. Despite the heartening surge, the index still ended the week down 709.05 points from last Friday’s close.
* Buoyed by low interest rates and a recovery in Japan, Wall Street stocks climbed for the second straight day Friday, with the Dow Jones industrial average up 30.41 points, or 0.9%, to close at 3,255.37.
* Stock prices rocketed higher in London Friday amid euphoria over the Conservative Party’s surprise election victory. The Financial Times-Stock Exchange index jumped 136.2 points, or 5.6%, to close at 2,572.6. The gain nearly matched the market’s record rise, a 142.2-point jump on Oct. 21, 1987. Friday’s volume appeared to be a record, though exact statistics do not exist.
The Dow ended the week only 6.26 points higher than last Friday. But because the market had plunged so far early in the week, the week-ending recovery represented a two-day gain of 74 points. Volume was a heavy 199.53 million shares on the New York Stock Exchange Friday, where advancing issues outpaced losers 1,199 to 519.
Stocks continued to enjoy a boost from the Federal Reserve’s move Thursday to cut interest rates, although a report Friday of higher-than-expected inflation dampened hopes that rates will be cut further.
The consumer price index rose 0.5% in March, the Labor Department reported, compared to expectations of a 0.3% gain. As a result, bond prices fell, with the bellwether 30-year Treasury bond off a fifth of a point, or $2.19 per $1,000 face amount, pushing up its yield to 7.88% from 7.86% Thursday.
The over-the-counter market did not share in Wall Street’s rally, with the NASDAQ composite index off 2.51 points to 584.24. The OTC market was hit by a sharp drop in many technology issues that had rallied strongly on Wednesday and Thursday.
Analysts doubted that the end-of-the-week rally would last, given the persistent doubts about first-quarter earnings that are beginning to come in. Philip Smyth, analyst at Birinyi Associates, cautioned that even though the market did well Friday, certain leading stocks, especially in computers, had a tough day.
Geoffrey Dennis, international economist and strategist at James Capel, predicted that there would be disappointment in the U.S. market next week. “There is still very little evidence from the U.S. economy to justify a market at this level,” he said. “We’re back in pretty rarefied territory, with prices at 25 times earnings. Until we see signs of stronger earnings, I think the market will be flat and indeed under some pressure.”
In England, analysts predicted continued celebration. Nick Parson of the CIBC Bank said he expects a two-month economic boomlet following the election. And Tokyo analysts questioned whether they had touched bottom yet. “It’s too early to say,” said George Nimmo of SBCI Securities. Among the market highlights:
* The tech-stock selloff dominated trading, despite the gains in the broader market. Leading tech stocks lower was Intel, which plunged 6 1/8 to 51 1/8 on concerns over the chip maker’s short-term prospects. Intel reported disappointing earnings late Thursday.
Most other major tech stocks also dropped on worries about prospects for sales of computers and other high-tech products in a slow-growing economy. Digital Equipment sank 3 to 45 1/4, AST Research lost 3/4 to 16 1/4, Novell gave up 1 7/8 to 54 1/8, Adobe Systems fell 2 7/8 to 39 7/8 and Hewlett-Packard tumbled 3 5/8 to 75.
Also adding to the gloom: Microsoft, down 4 to 116 ahead of a federal court hearing on Apple Computer’s copyright infringement suit against Microsoft. Apple fell 1 3/4 to 55 1/2.
* Many industrial stocks rebounded sharply, apparently helped by expectations that the Federal Reserve’s latest interest rate cut will at least help preclude another recession.
Emerson Electric rose 1 3/8 to 52 1/4, Dow Chemical gained 1 3/8 to 60 3/8, Ford advanced 1 1/4 to 40, Illinois Tool Works added 1 7/8 to 59 7/8 and Air Products & Chemicals jumped 2 1/4 to 43 5/8.
* Drug stocks also rose strongly. Johnson & Johnson leaped 3 1/8 to 100 3/4, Merck added 2 1/4 to 152 3/8, Schering-Plough rose 1 5/8 to 57 and Warner-Lambert gained 1 3/4 to 64 3/4.
* Among the few stocks reaching new highs were Mattel, up 1 3/8 to 36 3/8; Catalina Marketing, up 1 3/4 to 30 1/2; and Crown Cork & Seal, up 1 3/4 to 95 1/2.
* TelMex, the Mexican phone giant, jumped 1 5/8 to 56 1/4. The company reached a new labor pact with its union. The agreement will boost workers’ wages 14%.
Credit
The Treasury bond prices fell after the government released its consumer price index, which renewed concerns about inflation.
The sharp rise in the index raised concern that inflation may be accelerating. Inflation is a major worry of bond investors since it devalues the fixed-return securities.
But bond prices later regained some of their losses. Analysts attributed the rebound in part to investors who saw bargains and bought bonds, and to a belief that the inflation report may have been an aberration.
In addition, there were reports the Federal Reserve was buying Treasury securities from bond dealers, which would boost prices, said Steven R. Ricchiuto, chief economist at Barclays de Zoete Wedd Securities Inc.
The federal funds rate was quoted late Friday at 3%, down from 3.375% late Thursday.
In the secondary market for Treasury securities, short-term maturities were 5/32 point to 7/32 point lower, intermediate maturities were 1/32 point to 3/32 point lower, and long-term issues were 3/16 point to 1/4 point lower, the Telerate Inc. financial information service reported.
The movement of a point equals a change of $10 in the price of a bond with a $1,000 face value.
Currency
The dollar rose against most major currencies, but the spotlight was on the British pound following the Conservative Party’s victory.
Traders said the pound was likely to continue strengthening next week.
Now that the political uncertainty is over, dealers said sterling could rise higher--particularly against the German mark--on renewed optimism over Britain’s prospects for economic recovery. Other European economies, notably Germany, could face a downturn.
There wasn’t much U.S. news to affect the dollar Friday, said Mike Faust, a currency dealer with MMS International.
The sharp rise in consumer prices during March had marginal impact on the greenback, Faust said.
In New York, the British pound was quoted at $1.766, down from $1.767 late Thursday.
The dollar ended sharply higher against the German mark, driven higher by the consumer prices report and bouts of technical buying.
The dollar closed at 1.636 marks and 132.85 Japanese yen, up from Thursday’s finish of 1.617 marks and 132.05 yen.
Commodities
Most petroleum prices rose in the energy futures markets Friday, strengthening on a late burst of buying based largely on technical influences of supply and demand.
On other commodity markets, grain and soybean futures finished mixed; livestock and meat futures fell; and precious metals were mixed.
Light sweet crude oil for May delivery rose 13 cents to $20.44 a barrel; May heating oil rose 0.62 cent to 56.14 cents a gallon; May unleaded gasoline slipped 0.33 cent to 61.39 cents a gallon; May natural gas fell 1.6 cents to $1.294 per 1,000 cubic feet.
Meanwhile, on New York’s Commodity Exchange gold for April delivery ended $1.60 higher at $341.10 an ounce; May silver finished 0.5 cent lower at $4.108 an ounce.
World Stocks: The Week That Was
In a nail-biter of a week for stock investors, a dramatic plunge in Tokyo caused a selloff in U.S. stocks. But on Thursday and Friday, a drop in interest rates in the United States helped spark a huge rebound here and in Tokyo, while British stocks rocketed as the ruling government was reelected.
U.S.: Dow Jones industrial average: Friday close: 3,255.37, up 30.41 Japan: Nikkei index: Friday close: 17,850.66, up 1,252.51 Britain: Financial Times 100-share average: Friday’s close: 2,572.60, up 136.20
