Dow, Other Indexes Rack Up Sizable Gains
The Dow Jones industrial average reversed an early 56-point slide and rose 149.85--or 1.8%--to close at 8,574.85, with the rally accelerating in the early afternoon as President Clinton began his grand jury testimony about his relationship with Monica Lewinsky.
But the overall market was mixed, and the Dow remains 763 points--or 8.2%--below its July 17 record high of 9,337.97.
The Dow’s monthlong slide has been fueled by fears that Asia’s fiscal crisis and a slowdown in the U.S. economy will hinder growth in corporate profits. The Clinton-Lewinsky drama has spooked foreign investors, however, a key source of demand for U.S. stocks.
“The psychology of the market today is that a lot of the bad news is out,” said Michael Metz, a market analyst at CIBC Oppenheimer.
Although the blue-chip advance boosted most popular stock indexes to sizable gains, declining issues again outnumbered advancers.
“The broad market is still uneasy and drifting lower,” Metz said. “Whatever you call it, I don’t think this decline is over. Market valuations are still too high, and earnings expectations have to ratcheted downward. You still see a tendency to sell on rallies, which virtually precludes the chance of an extended rebound.”
Monday’s advance came despite another day of unsettling developments overseas. Japan’s Nikkei 225-stock average fell 2.2% amid growing doubt about the prime minister’s ability to resuscitate the economy.
Russia’s central bank devalued the ruble, a move that is expected to cause more hardship for Russian consumers by raising the price of key imports, including groceries.
Moscow also said Monday that it would halt payment on government treasury bills and impose a 90-day moratorium on payments of foreign debt. A ruble devaluation had been widely rumored, in part because the government faces heavy payments on ruble-denominated debt in coming days and weeks.
“The stock market is forward-looking, and the bad news about Russia hit the market in the past week, so people view devaluation as part of a solution to the problem,” said Alan Skrainka, chief market strategist at Edward Jones & Co.
Leading the Dow’s advance were Merck, up $3.88 to $131.25, and Eastman Kodak, up $3.06 to $85.56.
The Dow also drew a boost from Hewlett-Packard, one of several major companies that jolted the market in July with profit warnings. H-P rose $2.50 to $55.25 in advance of its latest quarterly report, which came after the close and topped Wall Street’s deflated forecasts.
The Nasdaq composite index rose 27.85 points to 1,818.04, led by its high-tech bellwethers: Intel rose $3.38 to $89.56, Dell Computer rose $4.94 to $110.56 and Microsoft rose $3.06 to $107.31. The blue-chip Standard & Poor’s 500-stock index rose 20.92 points to 1,083.67.
Advancers outnumbered decliners by a 10-9 margin on the New York Stock Exchange, but Nasdaq losers led gainers by a 5-4 ratio. NYSE volume totaled 707.43 million shares, down from 765.20 million on Friday.
The NYSE composite index rose 8.28 points to 543.99, and the Russell 2,000 index of smaller stocks rose 1.17 points to 403.96.
In currency trading, the dollar fell against the German mark as markets downplayed possible effects of Russia’s currency move on Germany, which has a large exposure there because of loans and direct investments. The dollar also slipped against the yen after a Japanese official heightened speculation that central banks would use intervention to halt the Japanese currency’s fall.
In late trading, the dollar was down at 1.7940 marks from 1.8015 at the close Friday. It was quoted lower at 145.96 yen, from 146.35.
Bond prices closed weaker, pressured in light trading by gains in stocks and the dollar’s losses against marks and yen, dealers said. The yield on the benchmark 30-year Treasury bond was unchanged at 5.54%.
Among Monday’s highlights:
* BankAmerica rose $2.75 to $82.13 as the bank’s $56.6-billion merger with NationsBank received the approval of the U.S. Justice Department. The banks agreed to sell 17 branches with $491.6 million in deposits in New Mexico, the only region where the two companies overlapped enough to concern regulators. NationsBank rose $3.13 to $73.19.
* AMR rose $3.06 to $63.44 as the second-largest U.S. airline company abandoned its latest attempt to raise leisure fares 4%, after Northwest Airlines and Trans World Airlines refused to do likewise.
On commodity exchanges, grain prices ended higher, helped by concern that floods in China may have damaged crops. Crude oil futures declined.
In Europe, Frankfurt’s DAX index fell 2.2% and London’s FTSE-100 fell 1%.
*
Market Roundup, D13
*
* TOKYO TRAVAILS: Will the Nikkei again bounce from its key support level in the ‘90s? D4
