Mexican stocks plunged Wednesday after the secretary general of Mexico's ruling party, Jose Francisco Ruiz Massieu, was shot to death--the second Mexican political assassination this year.
In U.S. markets, stocks rallied briskly as bond yields eased, one day after the Federal Reserve Board decided to hold short-term interest rates steady.
In Mexico City, the Bolsa stock index plummeted as much as 3.1% before recovering in late trading to close down 53.61 points, or 1.9%, at 2,764.82.
Ruiz's murder follows the the March assassination of the ruling party's initial presidential candidate and a rebel uprising in the state of Chiapas in January. Analysts say all of these events naturally have caused investors to question Mexico's stability.
On Wall Street, meanwhile, the Dow industrials added 15.14 points to 3,878.18, though the index fell back from a 25-point morning gain. The broad market was strong: Winners topped losers by 14 to 8 on the Big Board in heavy trading.
"It's a broad-based rally that seems to be encompassing most sections of the market," said Paul Hennessey, trader at Boston Co.
Stocks were helped as bond yields fell back from Tuesday's 27-month highs. The 30-year Treasury bond yield eased to 7.81% from 7.84%. And the Treasury sold new five-year notes at an average yield of 7.18%, in what analysts described as strong investor bidding.
Economic news that might have scared the bond market Wednesday seemed to be ignored. The government reported a big rise in durable goods orders in August.
That report--and the Fed's inaction on rates--also appeared to spark renewed buying of industrial stocks, on the expectation that the economy will continue to grow.
Among Wednesday's highlights:
* Industrial issues rising sharply included Caterpillar, up 1 5/8 to 54 5/8; AlliedSignal, up 1 1/8 to 35 1/4; Dow Chemical, up 1 7/8 to 78 1/2; USX-U.S. Steel, up 1 1/4 to 42 1/4, and TRW, up 2 1/8 to 72.
Also, machine tool maker Cincinnati Milacron leaped 2 1/2 to 26 after Merrill Lynch upgraded the stock.
* Many health care stocks continued to advance, as Congress declared health-care reform efforts all but dead for this year. Warner-Lambert rose 3/4 to 81 1/2, Pfizer added 7/8 to 70 1/4, Health Systems jumped 2 to 26 3/4, PacifiCare A leaped 4 to 78 1/2 and U.S. Healthcare gained 2 1/8 to 46.
* Food stocks attracted buyers. General Mills gained 2 1/8 to 57, Kellogg added 1 to 55 7/8 and Campbell Soup surged 1 3/8 to 39 5/8.
* Among Southland issues, insurer 20th Century soared 1 3/8 to 12 1/2 after leaping 1 3/4 on Tuesday, when it received a cash infusion from a larger firm. Brokerage Bear Stearns rated the stock a "buy."
* Among the day's losers, trucker Roadway dove 2 3/4 to 56 3/4 after reporting quarterly earnings far below expectations.
* U.S.-traded Mexican shares were broadly lower. Telmex fell 1 1/8 to 63 1/4, Coca-Cola Femsa lost 1 to 36 7/8 and Vitro dropped 1 to 25 3/4.
Overseas, London stocks finished sharply higher as the FTSE-100 index jumped 30.2 points to 3,038.7. The Frankfurt DAX index added 9.38 points to 2,068.11.
Tokyo's Nikkei index gained 38.71 points to 19,507.60 after Tuesday's selloff.
In U.S. commodity trading, gold futures rallied early but then sold off. October gold declined $3.60 to $394.50 an ounce, wiping out nearly all of Tuesday's gain.
The dollar strengthened after Treasury Secretary Lloyd Bentsen and Trade Representative Mickey Kantor said the United States won't impose broad-based trade sanctions against Japan even if talks this week don't achieve all the desired goals for opening Japanese markets.
In New York, the dollar rose to 98.85 Japanese yen from 98.12 on Tuesday.