Stocks, Dollar, Bonds Shake Off News From Asia

Stocks muscled higher Tuesday as an expected sell-off in Japan and turmoil in South Korea’s market failed to rattle Wall Street.

Bond prices and the dollar also rose.

The Dow Jones industrial average, which lost 113 points on Monday, rose 41.03 points to 7,808.95 after meandering from an early 53-point gain to a 28-point loss around midday.

Broad-market indicators also turned higher despite Tuesday’s 5% tumble on the Tokyo Stock Exchange, which followed the collapse of a leading Japanese brokerage. Today Japan stocks opened higher.

“The market isn’t saying, ‘Yahoo!’ It’s saying, ‘We’ve seen what’s happened in Tokyo and now it’s back to business as usual in a very good economic environment,’ ” said Alfred E. Goldman, director of market analysis at A.G. Edwards & Sons of St. Louis.

Compounding the volatility in Japan, stocks slid nearly 3% in South Korea on Tuesday amid fears that an international bailout package will carry tough terms. Today, South Korean stocks rose after the opening bell.

Wall Street may have been emboldened by European markets, which held steady on Tuesday after suffering heavy losses a day earlier. Frankfurt’s DAX index rose 0.5% and London’s FTSE-100 slipped 0.7%.

U.S. investors bought blue-chip stocks and multinational companies, hoping they would benefit from stability in Asia, with IBM and Microsoft among the big gainers.

The dollar rose against the Japanese yen, touching a five-year high amid fears the country’s banking woes would worsen.

The yen’s decline was hastened by talk that more Japanese banks were on the brink of bankruptcy and news that Tokuyo City Bank, a secondary regional bank, would close its doors, transferring its operations to other regional banks.

The dollar rose as high as 128 yen overnight before retreating to 127.07 yen in late New York dealing, up from Monday’s 126.80 close.

“Investors are going to keep buying anything they perceive as safe-haven currencies like the Swiss franc and the mark,” said Greg Schwake, dealer at Commerzbank in New York. Germany and Switzerland are considered to be less exposed to fallout from Asia’s currency turmoil.

Meanwhile, U.S. bond prices rose after traders snapped up the government’s $11 billion of new five-year notes amid optimism Treasury securities will remain popular as a haven from turbulent world financial markets.

The yield on the benchmark 30-year Treasury bond fell to 6.05% from 6.06% on Monday.

At its auction, the Treasury sold the five-year notes at a yield of 5.769%, the lowest in almost two years. Demand was stronger than the average at the previous 10 five-year note sales, based on the dollar amount of bids received divided by securities sold. The bid-to-cover ratio was 2.98, compared with an average of 2.61 at the 10 previous sales.

Meanwhile, there were also signs Tuesday that the domestic economic outlook remains strong enough to help offset the impact of weakening demand from foreign markets.

The Conference Board reported that U.S. consumer confidence shot higher in November, and a real estate industry association reported that sales of previously owned homes rose 1.2% in October to a record level.

The economic trouble in Asia and Latin America “is definitely going to have an affect on earnings” for U.S. companies, said Barbara Marcin, senior equity portfolio manager at Citibank Global Asset Management. “But the U.S. economy is still most important to U.S. stocks. Whatever happens overseas is still at the margin.”

Advancing issues outnumbered decliners by a 9-to-8 margin on the New York Stock Exchange in heavy trading.

The Standard & Poor’s 500-stock list rose 4.15 points to 950.82, the NYSE composite index rose 1.84 points to 496.98, and the Nasdaq composite index rose 2.05 points to 1,589.0 1/44.

Smaller-company shares lagged the blue-chip rebound, finishing slightly lower. The Russell 2,000 index of smaller companies fell 0.92 point to 426.91.

In commodities trading, gold fell below $300 an ounce in after-hours trading on the New York Mercantile Exchange, the first time that key price was breached since March 1985.

In earlier floor trading gold fell as low as $300 on concern that more central banks would sell some of their reserves after a Bank of England official said a new European central bank won’t have much use for gold in its reserves.