Stocks Zoom on Oil, Asia Moves
Wall Street got a double dose of good news Monday, as oil prices sank to five-month lows while worries over the Japanese financial system calmed considerably.
The Dow industrials leaped 189.98 points, or 2.4%, to 8,013.11, in a broad rally that began early in the day and gained steadily thereafter.
Financial stocks, in particular, posted large gains, as did retailing issues.
The Dow’s rise was its fourth-biggest ever in point terms, but a far less significant day in percentage terms. The Dow now has climbed to its highest level since Oct. 22--just before the mini-crash that sliced 554 points off the index on Oct. 27.
U.S. stocks were boosted after Tokyo shares rallied overnight, in the wake of Japanese Prime Minister Ryutaro Hashimoto’s comment that the government will do “everything possible” to protect the financial system, which has been slammed by concerns over bad bank loans.
The Nikkei-225 index jumped 371.33 points, or 2.2%, to close at 17,007.59.
Meanwhile, falling oil prices in New York also buoyed stocks, on the expectation that lower energy prices will be a boost for the global economy.
Oil prices tumbled on OPEC’s decision to raise its production ceilings for member countries.
The futures contract for January crude oil fell 49 cents to settle at $18.66 a barrel on the New York Mercantile Exchange, down from Friday’s close of $19.15.
The 11-nation Organization of Petroleum Exporting Countries, meeting in Jakarta, Indonesia, agreed over the weekend to boost its official production ceiling to 27.5 million barrels a day, up from 25.033 million.
Many members of the group were already exceeding their individual quotas, so actual production will not increase by that much. OPEC exports more than a third of the world’s oil.
The U.S. Department of Energy said it expects the hike in the production ceiling to increase the group’s oil output by 500,000 barrels a day, reducing oil prices in the short term.
“This should lead to a near-term decline in oil prices but not a collapse in oil prices,” the DOE’s Energy Information Administration said in an analysis of OPEC’s new production level.
Also pushing down crude oil prices were indications that Iraq may soon be allowed to sell more oil under the United Nations’ oil-for-food program.
On Wall Street, winners topped losers 2 to 1 on the New York Stock Exchange in active trading. In the broad market, the Nasdaq composite index jumped 30.17 points, or 1.9%, to 1,630.72.
The Standard & Poor’s 500-stock index rose 19.37 points, or 2%, to 974.77, less than 9 points shy of record territory; and the NYSE composite index rose 8.63 points, or 1.7%, to 507.73, moving within 7 points of a new high.
Banks, financial service companies and technology companies led the rally.
Investors also cheered benign economic news that showed the U.S. economy is sailing along with inflation in check.
“The gains are really being led by a big euphoria rally for banks,” said Christine Callies, chief investment strategist for Credit Suisse First Boston.
The National Assn. of Purchasing Management’s manufacturing index for November was a less-than-expected 54.4 points. Construction spending in October rose by a weaker-than-anticipated 0.1%.
The yields on long-term U.S. bonds hovered near 21-month lows after the manufacturing report, which suggests the economy is growing slowly enough to keep inflation at bay.
The price of the benchmark 30-year Treasury bond rose, with its yield falling to 6.03% from 6.05% on Friday.
Among Monday’s highlights:
* The Dow’s biggest gainers were J.P. Morgan, which rose $6.56 to $120.75; American Express, which rose $3.81 to $82.69; Travelers Group, which rose $3.19 to $54.06; and IBM, which rose $3.06 to $112.56.
* Technology issues benefited from a rebound in Asia. Compaq Computer rose $3.56 to $66, Intel rose $3.88 to $81.50, Cisco Systems rose $4.19 to $90.44 and Dell Computer rose $5.88 to $90.06.
* Oil-related shares were among the few industry groups in the S&P; 500 to drop. The decline affected stocks in all aspects of the business, from big oil companies to explorers to drillers. Amoco lost $1.75 to $88.25, Texaco fell $1.63 to $54.88 and Mobil lost $1 to $70.94.
Oil service stocks, which doubled from February to November, continued to tumble. Schlumberger fell $4.25 to $78.06, Cooper Cameron fell $3.69 to $57.25 and Smith International fell $4 to $60.
* Airline shares benefited from the decline in oil prices. AMR rose $6.25 to $127.56, UAL gained $5 to $90 and Delta Air Lines gained $4.56 to $116.
In currency trading, the dollar topped 129 Japanese yen for the first time since May 1992 and zeroed in on the psychologically important 130 level, dealers said. But it ended in New York at 128.91, up from 127.82 on Friday.
Fueling the surge past last week’s five-year high at 128 yen was new selling in the South Korean won. The won hit a record low against the dollar, pressuring the yen as negotiations for an international bailout of South Korea, the world’s 11th-largest economy, dragged on, dealers said.
However, after trading ended Monday, South Korea said it reached an initial agreement with the International Monetary Fund on a loan package that would require Seoul to liquidate troubled banks and lower economic growth.
Market Roundup, D12
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Good News at the Pump Soon?
Oil Prices tumbled Monday, helping to boost Wall Street. January crude oil futures in New York fell 49 cents to $18.66 a barrel, the lowest since June, after OPEC voted to raise output. Gasoline futures also fell. (Investor Spotlight, D13) Oil futures’ weekly closes, and latest:
Monday: $18.66
Source: Bloomberg News
