Wall Street Bounces Back Strongly From Japan Jitters

Blue-chip stocks staged a powerful rebound Tuesday, lifting bonds and the dollar, as the market shrugged off remarks by the Japanese prime minister that triggered Monday’s massive sell-off.

The Dow Jones industrial average ended up 153.80 points, or 2.02%, at 7,758.06 after Monday’s 192-point drop, which was the second-steepest fall ever for the blue-chip index. The Dow is now back within striking distance of Friday’s record close of 7,796.51.

Most broad-market indicators also bounded back from the previous session’s plunge, led by technology and drug stocks. The technology-rich Nasdaq market set a new high, adding 18.11 points to reach its 17th record of the year at 1,452.43.

Advancing issues outnumbered decliners by a 9-5 margin on the New York Stock Exchange in heavy trading. The Standard & Poor’s 500-stock list rose 17.72 points to 896.34, and the NYSE composite index rose 7.68 points to 466.17, leaving both measures less than 2 points shy of record territory. The Russell 2,000 index of small-capitalization stocks rallied 2.48 points to 393.20.

Stocks rallied quickly as Japan moved overnight to calm Wall Street’s fears that Japan might sell some of its huge U.S. Treasury holdings.

On Monday, Japanese Prime Minister Ryutaro Hashimoto, responding to a question after a speech in New York, said Japan had been tempted in the past to sell its holdings of U.S. Treasury securities and boost its gold reserves, but had not done so.

Japan came to the market’s rescue overnight and reassured financial markets that the country was not planning an imminent sale of its U.S. government bond holdings.

“The [prime minister’s] comments seemed off-the-cuff. When people really took a look at them, they decided to get back in,” said Kenneth Ducey, director of trading at BT Brokerage.

The market’s comeback surprised many traders, particularly the strength of a late-day rally that drove the Dow, already up 50 points, more than 100 points higher in the last 90 minutes of trading.

“The market seems to be able to weather any bad news. It shakes it off and goes back on its merry way,” Ducey said.

The U.S. bond market bristled briefly in the morning, trimming the early gains in stocks, after a private research group reported that consumer confidence unexpectedly rose in June, adding to May’s 28-year high.

Higher consumer confidence suggests increased spending, which could aggravate inflationary pressures at the nation’s busy factories. The stock market has been rallying since mid-April amid signs that the pace of business has been moderating enough to avoid another economy-slowing interest rate increase by the Federal Reserve Board, which meets next week.

But bonds recovered, and as prices rose, the yield on the benchmark 30-year Treasury dipped to 6.69% from 6.70% on Monday.

Among Tuesday’s highlights:

* The Dow’s biggest gainers were drug issues Merck, up 4 1/2 to 103 1/8, and Johnson & Johnson, up 2 5/16 to 66 5/16.

They were not alone among advancing pharmaceuticals. Roche Holding gained 2 1/4 to 94, Bristol-Myers Squibb jumped 8 3/8 to 84 3/4, Eli Lilly rose 3 15/16 to 109 15/16, Pfizer jumped 4 3/8 to 115 5/8 and Pharmacia & Upjohn added 1 7/8 to 35 7/8.

* Among big-name technology issues, Microsoft rose 4 to 132 1/16, Dell Computer added 3 9/16 to 123 and Intel gained 2 13/16 to 148. Also, IBM rose 4 1/16 to 91 13/16 and Sun Microsystems rose 1 1/8 to 37 15/16.

In New York currency trading, the dollar fell to 114.82 Japanese yen from 114.95 and rose to 1.7232 German marks from 1.7175.