U.S. Stock Rise Lifts Asian Markets Today
U.S. blue-chip stocks on Monday recovered from an early dive to finish higher, setting the scene for a rebound in pummeled Asian markets early today.
But Wall Street overall was lower on Monday, as worries over Asia’s economic future--and U.S. corporate earnings--continued to weigh on investors.
The Dow Jones industrial average ended up 66.76 points, or 0.9%, at 7,647.18, after tumbling as much as 137 points earlier in the day.
The U.S. market’s early slump followed a deep dive in key Asian markets overnight. The Hong Kong market index, for example, sank 8.7% Monday after a major Hong Kong investment bank--Peregrine Investments--failed. The Singapore market slid 8.8%. China’s stock markets also were slammed.
But while U.S. blue chips were hammered at the opening Monday, supportive words from some well-known investment strategists helped buoy sentiment. Goldman, Sachs & Co.’s Abby J. Cohen, for example, reiterated her view that Asia’s slumping economies and currencies will have a muted impact on U.S. corporate profits.
“Prices got low enough that investors said to themselves ‘Let’s step in and pick up some bargains,’ ” said Joe Stocke, a money manager at CoreStates/Meridian Investment Co.
Early today in Asia the rebound in the Dow was at least partially responsible for sparking a turnaround in many markets. Hong Kong’s main index was up 5% to 8,528.29 at midday; Singapore’s market was up 7.1% to 1,149.62, and even battered Indonesian stocks rallied, with the main index up 6.6% top 373.40 around midday.
In Hong Kong, at least, “It seems like all the bad news is reflected in the market and for the time being we don’t have anything which can upset the market,” said Ricky Tam, senior research analyst at Delta Asia Securities.
But while Wall Street’s rally lifted the Dow, the market overall ended lower Monday despite late buying. Losers topped winners by 17 to 13 on the New York Stock Exchange and by 28 to 15 on Nasdaq.
Trading volume was extremely heavy again, with 705.5 million shares traded on the NYSE, the sixth-biggest tally in the exchange’s history.
The Nasdaq composite index was up just 4.36 points to 1,507.58, although it had fallen as low as 1,465 early Monday--its weakest point since the late-October market sell-off.
The Russell 2,000 index of smaller stocks fell 2.07 points to 410.88.
Some analysts counseled caution, saying Asia’s woes may be far from bottoming.
“Maybe Peregrine is just the tip of the iceberg,” said Michael Metz, chief investment strategist at CIBC Oppenheimer & Co. in New York. “We have more of this financial unraveling to do before we get out of the woods. It’s going to put a lid on the market for quite a period.”
But in addition to Goldman, Sachs’ Cohen, two other Wall Street strategists made supportive comments about stocks on Monday.
Barton Biggs, chief global strategist at Morgan Stanley, Dean Witter, Discover & Co., said the bear market in Asia may be in its final stages.
And Byron Wien, Morgan Stanley’s chief U.S. strategist, urged investors to buy U.S. stocks “selectively.”
“The U.S. market is getting to look cheap on valuation measures,” Wien said at the firm’s Monday morning strategy session. “The risk is that these measures will not work if the U.S. becomes seriously infected with the Asian flu. My view is that the fear is greater than the reality and that we are in the process of finding a bottom before heading higher.”
Stocks also were helped Monday by another rally in bonds. The yield on 30-year Treasury bonds fell to a new 20-year low of 5.69% from 5.73% on Friday.
And in commodities trading, oil, gold and other key commodities continued to fall, pushing the Goldman Sachs commodity index to a new four-year low. Lower commodity prices could help corporate earnings by lowering the cost of raw materials for many companies.
In another report on Monday, the Investment Company Institute, chief trade group for mutual funds, estimated that stock funds had net cash inflows of $18 billion in December, about even with November but well ahead of the inflow in December 1996.
Bond funds took in an estimated $8.5 billion in fresh cash in December, down from $10.4 billion in November, the ICI reported.
So far this month, however, the fund picture is mixed, with some industry trackers saying that investors are on balance pulling money out of U.S. stock funds, in what normally is the strongest month of the year for inflows.
By the end of the day, the focus was back on earnings reports. And Motorola’s report, released after trading ended, didn’t please analysts: The technology company’s fourth-quarter earnings were 3 cents a share below expectations.
Earnings reports will dominate Wall Street news this week.
Among Monday’s highlights:
* Intel, which is due to report earnings after today’s market close, rose $3.75 to $75.63 to lead the rebound on the technology-heavy Nasdaq market. Goldman Sachs’ Cohen mentioned Intel favorably on Public Broadcasting Service’s “Wall Street Week With Louis Rukeyser” on Friday.
* Among blue chips, Procter & Gamble surged $3.44 to $82.31 after saying it will raise prices on key paper goods, such as toilet paper.
Other winners in the Dow index included Chevron, up $2.19 to $73.31; GE, up $2 to $74.44; and Wal-Mart, up $1.31 to $39.50.
* Drug stocks attracted buyers, with Merck up $3.31 to $106.19 and Warner Lambert up $4.44 to $125.56.
* Airlines also rallied. AMR, parent of American, shot up $4.56 to $129.56. US Airways rose $1.81 to $61.25.
* On the downside, some financial stocks continued to weaken, including J.P. Morgan, down $2.56 to $103.19, and Travelers, down 44 cents to $47.25.
Overseas, stocks fell 14% in Moscow, but several European markets trimmed their losses as Wall Street turned around. Frankfurt’s Dax-30 index fell 3.5% while Paris’ CAC-40 fell 2%.
In Mexico City the main index gained 3.1% as Wall Street rebounded.
In currency trading, the dollar also gained ground, benefiting from the flight to U.S. Treasuries. In late New York trading, the U.S. currency hovered at 132.69 Japanese yen from 132.03 on Friday.
Market Roundup, D14
