Dow Gains 14.57 as Bear Scare Subsides
Stocks rose and bond yields fell Monday as investors grew more confident that the stock market’s recent tumble was merely a correction and not the start of a bear market.
The dollar fell sharply against the Japanese yen as no early resolution to U.S.-Japanese trade tensions was in sight.
Gold prices sank to their lowest levels in a month as tensions eased before South Africa’s first all-party elections, taking some shine off the metal’s safe-haven status.
The Dow Jones industrial average ended up 14.57 points at 3,688.83. The recent selloff had stripped more than 200 points from the Dow over the course of two weeks.
Monday’s rally stemmed largely from an upbeat assessment of the market’s outlook, analysts said.
Salomon Bros. equity strategist David Shulman said stocks were in the midst of a correction, not a bear market. He estimated the current low point for the Dow will be 3,500 to 3,600.
Lehman Bros. analyst Elaine Garzarelli said her fair-value estimate for the Standard & Poor’s composite index is 500, which would equate to roughly 4,100 on the Dow.
The S&P; index rose 2.77 points to 449.87.
Analysts said a drop in long-term interest rates and some bargain hunting in well-known large-capitalization stocks also lifted the blue chip market.
The 30-year Treasury bond rose 7/32, or $2.19 per $1,000 in face value, to yield 7.23%, down from 7.25% at Friday’s close.
The stock market’s recent drop was fueled by rising interest rates and concern that an overheating economy would spark inflationary pressures.
But investors were also cautious ahead of the March producer price report, due today, and consumer price data, due Wednesday.
“By and large, we’re in a market that is still cautious ahead of the PPI and CPI numbers,” said Alan Ackerman, market strategist at Reich & Co. “We have a little bit of bargain hunting in the quality sectors, but nothing to write home about.”
In the broader market, advancing issues led declines 1,167 to 1,008 on New York Stock Exchange volume of more than 243 million shares.
Among the trading highlights:
* The stocks of auto companies rose after tumbling last week amid concerns about higher interest rates and what that would mean for car sales. Chrysler led the NYSE most-active list, rising 1/4 to 51 1/8.
* Among blue chip stocks attracting buyers were Chevron, up 1 1/8 to 86, and General Electric, up 1 1/8 to 98 3/8.
* Encore Computer led the Nasdaq most-active list, rising 15/16 to 4 3/16. CNBC’s financial correspondent Dan Dorfman said the company is brokerage firm Kensington Wells’ No. 1 stock pick for the next nine to 12 months.
* Semiconductor stocks came under pressure due to a downgrading of the group by CS First Boston. Texas Instruments dropped 3/4 to 78 5/8 and Micron Technology slipped 3 3/8 to 91 3/8.
* U.S. Healthcare rose 1 3/4 to 46 1/2. Standard & Poor’s said the stock will be added to its S&P; 500 index after Friday, replacing Grumman, which is being acquired by Northrop.
* Gold stocks fell with sharply lower prices for the metal. Battle Mountain Gold dropped 5/8 to 10 1/2, Newmont Mining shed 3/8 to 53 and Homestake Mining ended off 5/8 to 20.
In overseas markets, London’s FTSE-100 closed up 28.6 points at 3,149.4 against a background of robust gains on continental European bourses. Tokyo’s Nikkei average closed down 36.91 points at 19,898.08 points. In Frankfurt, the German DAX-30 index ended at 2,225.33, up 21.99 points.
In other markets:
* The dollar fell to 103.45 Japanese yen late in New York from 105.15 yen Friday, continuing its slide after Japanese Prime Minister Morihiro Hosokawa’s abrupt resignation last week. Despite assurances to the contrary from U.S. officials, dealers believed Hosokawa’s departure will slow the pace of trade negotiations to cut Japan’s huge trade surplus.
The dollar was little changed at 1.7130 German marks, up fractionally from 1.7125 marks Friday.
* Gold prices fell $6.30 cents on New York’s Commodity Exchange to $377.90 an ounce. Dealers said reduced tensions in South Africa had apparently convinced some traders to look elsewhere for profits.
The selloff took place despite news that at least 34 people were killed in Natal in political violence over the weekend.
South Africa, which produces 75% of the world’s platinum and 20% of the West’s gold, holds elections April 26. Fears of violence disrupting supplies had boosted prices recently.
* Oil prices settled at nine-week highs in a technical spurt. May crude gained 30 cents to $15.87 a barrel at the New York Mercantile Exchange.
Market Roundup, D8
