FINANCIAL MARKETS : Budget News Prompts Dow to Regain 37.21 Points

From Times Wire Services

Stocks rose Thursday, rebounding from a sharp sell-off the day before amid signs that federal budget talks in Washington may be back on track.

The Dow Jones industrial average climbed 37.21 points to 5,096.53, recovering most of a 50-point drop Wednesday after the budget negotiations broke down for the second time.

News of a new meeting planned for today strengthened a tendency already in place to bid stock prices higher after Wednesday's sell-off, said Ricky Harrington, a technical analyst at Interstate-Johnson Lane in Charlotte, N.C.

But although stock prices may jump temporarily if a budget accord is reached, they may retreat afterward, Harrington warned. One reason is that balancing the budget will require a significant drop in spending, which could worsen the effects of an already slowing economy, Harrington said.

Wall Street was also betting that the Federal Reserve Board will again cut interest rates early next year amid continued signs of a slowing economy.

Advancing issues led decliners by 3 to 2 on the New York Stock Exchange on Thursday. Broader market indexes rose, helped by a strong comeback in technology issues.

In a regional report, the Federal Reserve Bank of Philadelphia said manufacturing activity increased in parts of the Northeast in December but that the outlook for the next six months was not as bright as it was a month ago.

The yield of the Treasury's main 30-year bond fell to 6.09% from 6.11% late Wedensday. A successful sale of $12 billion in 5-year notes drew better response than a 2-year note auction on Wednesday. Traders said the notes yielded 5.55%, slightly below expectations.

In Mexico, stocks rose to their highest levels in 15 months on optimism that lower interest rates will spur company earnings growth. The Bolsa index rose 87.9 points, or 3.2%, to 2834.39, its highest level since closing at 2840.08 on Sept. 26, 1994.

Mexican stocks rose because "investors like the direction of interest rates" and what they might mean for company earnings, said Claudio Brocado, head of research at the Valores Finamex brokerage.

Other foreign stock markets rose as the pressure on Wall Street from the Washington budget negotiations receded. The 225-share Nikkei index in Tokyo added 1.05%, the FTSE-100 index in London rose 0.54%, and the DAX index in Frankfurt edged up 0.13%.

Among market highlights:

* Technology issues were boosted by 3Com, which rose 2 1/2 to 44 1/8 after the company reported second-quarter net earnings of 9 cents per share, up from 5 cents last year. On the Big Board, IBM rose 1 1/2 to 90 7/8. In Nasdaq trading, Microsoft rose 2 7/8 to 90.

* The shares of biotech companies soared on news of positive results in a clinical trial for Centocor's blood-clot-busting drug ReoPro. Centocor surged 7 1/16 to 32 1/8. Eli Lilly, Centocor's marketing partner for ReoPro, rose 4 1/8 to 55 1/4.

* Airline stocks sank after UAL, parent company of United Airlines, confirmed that fourth-quarter results would fall below analysts' expectations. UAL's shares retreated 17 7/8 points to 180 1/8 on the Big Board. Also, AMR shares dropped 2 3/8 to 73 3/4 after the crash of one of it American Airlines jetliners in Cali, Colombia.

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