Stocks Resurge as Japan Jitters Do a Vanishing Act

Well, that didn’t take very long.

U.S. stocks roared back on Tuesday after Monday’s surprise dive, as investors decided that seemingly threatening remarks by Japan’s prime minister were either misinterpreted or immaterial.

The Dow Jones industrials rocketed 153.80 points, or 2%, to 7,758.06, recouping 80% of Monday’s 192.25-point plunge.

The broad market also was sharply higher in active trading, as some investors swarmed at the sight of even slightly lower stock prices after Monday’s dive.

“The Japanese prime minister’s comments spooked the market, but it also created another buying opportunity,” said Anthony Conroy, head equity trader at BT Global Asset Management in New York.

Winners topped losers by 18 to 10 on the New York Stock Exchange, in heavy trading. And the Nasdaq composite index of mostly smaller stocks surged 18.11 points, or 1.3%, to a record 1,452.43.

Comments by Japan’s Ryutaro Hashimoto on Monday afternoon in New York had fueled a fast sell-off in blue-chip shares. Hashimoto, in answer to a question after a speech, said Japan had previously considered dumping its huge U.S. Treasury bond holdings when the dollar’s value was falling, because Japan felt that the United States wasn’t doing its part to maintain currency stability.

The remarks sounded to some traders like a veiled threat that Japan might cash out of U.S. bonds if it felt that Washington was arrogant in its dealings with Japan.

But by late Monday, Hashimoto was insisting that his comments had been “misinterpreted.” And Finance Minister Hiroshi Mitsuzuka said Tuesday that Hashimoto’s “real intention was not reported correctly” and that Japan had no intention of selling U.S. Treasuries.

In the U.S. bond market, yields eased slightly Tuesday, with the 30- year T-bond ending at 6.69%, down from 6.70% on Monday. But yields had only inched higher on Monday, showing little reaction to Hashimoto’s remarks--unlike stocks.

The Treasury sold $15.5 billion of new two-year notes Tuesday at an average yield of 6.03%. Demand was strong.

Bonds’ stability was all the more surprising in the wake of a report that U.S. consumer confidence has reached its highest level since 1969--which could translate into a resurging economy soon.

The dollar also was calm on Tuesday, slipping marginally to 114.82 yen in New York.

Many analysts said Monday’s dive in stocks was simply an overreaction, but that it also was a reminder of the market’s increasing volatility.

Among Tuesday’s highlights:

* Drug stocks led the market higher, after Bristol-Myers Squibb said it received a patent for administering its cancer drug, Taxol. The patent could help the company keep rival drugs at bay.

Bristol shares zoomed 8 3/8 to 84 3/4. Among other drug giants, Johnson & Johnson gained 2 3/8 to 66 3/8, Lilly jumped 3 15/16 to 109 15/16, Merck shot up 4 1/2 to 103 1/8 and Abbott Labs gained 3 1/8 to 68.

* Food and other consumer issues also rallied strongly. CPC International rose 2 to 90 1/2, Hershey jumped 2 9/16 to 57 13/16 and Gillette surged 2 1/2 to 95 3/4.

* Among tech issues, Microsoft rose 4 to 132 1/16, Dell Computer added 3 9/16 to 123, Intel gained 2 13/16 to 148 and IBM leaped 4 1/16 to 91 13/16.