Banks, Energy Lead U.S. Rally; Asia Also Rises
Strength in financial, energy and telecommunications stocks helped lift Wall Street to its second straight broad-based advance on Wednesday, with continuing rallies in Asian stocks providing an added boost to confidence.
The Dow Jones industrial average rose 52.56 points to 7,784.69, bringing its three-day gain to 204.27 points--which recoups slightly more than one half of last week’s 385-point decline.
Wednesday’s rally saw winners top losers by 19 to 11 on the New York Stock Exchange and by 24 to 18 on Nasdaq. The Nasdaq composite index was up 7.13 points to 1,548.76.
“A measure of sanity has been restored to the market,” said Stanley Nabi, strategist at Wood Struthers & Winthrop Management Corp. in New York.
A continuing rebound in key Asian currencies and stock markets, and another rise in European markets, helped sentiment on Wall Street, traders said.
Last week, the collapse of Indonesia’s currency--after the country balked at taking austerity measures demanded as part of the International Monetary Fund’s bailout plan--triggered heavy selling in markets worldwide, on fears that Asia’s economic crisis was spiraling out of control.
But by early this week it became apparent that Indonesia’s government would reverse itself and comply with the IMF plan. That has fueled rallies in most beaten-down Asian currencies and stocks this week. On Wednesday the main Indonesian stock index rose 5.7% after soaring 9% on Tuesday.
In Singapore the main stock index jumped 7.5% on Wednesday, while Hong Kong’s key index gained 5.8% and South Korea’s index added 2.6%.
Among currencies, Indonesia’s rupiah strengthened to 7,100 to the dollar early today from 7,250 on Wednesday and 8,450 on Tuesday.
South Korea’s won was at 1,550 to the dollar early today, up from 1,665 on Wednesday.
By mid-morning today, however, some Asian markets were sinking again. The Hong Kong market was down 6.2% to 8,652 at mid-morning on concerns about rumored debt problems at Sino Land. The company said there was “no grounds” to the rumors.
On Wall Street the bond market was placid on Wednesday, with yields closing mostly unchanged. The 30-year Treasury bond ended at 5.73%, same as Tuesday.
With bonds flat and Asia recovering, fourth-quarter corporate earnings reports vied for investors’ attention on Wednesday.
Strong reports from some financial and energy companies helped bring buyers back to stocks.
Shares of mortgage giant Fannie Mae, for example, gained $1.13 to $59.75 after the firm reported quarterly earnings up 14%. Oil-drilling firm Rowan Cos. jumped $1.56 to $26.75 after it said quarterly earnings soared 122%.
Still, “We have sharp sell-offs and then the market rebounds, but it doesn’t seem to get it all back,” said Robert Streed, analyst at Northern Trust in Chicago. “The fourth quarter numbers are coming in pretty well, but the outlooks are being toned down.”
Among Wednesday’s highlights:
* Financial stocks rallying included Merrill Lynch, up $1.13 to $65.94; Coast Savings, up $1.69 to $59.13; and NationsBank, up $2.75 to $60.81.
Also, CitFed Bancorp rocketed $11.63 to $49.38 after Fifth Third Bancorp agreed to buy the bank in a stock deal. Fifth Third fell $4.50 to $76. Both are Ohio banks.
BankAmerica rose $2.75 to $68.06. Analyst Bruce Hartley of Lehman Bros. raised his rating on the bank to “buy” and said the stock could hit $85 in the next year. He said concern over the bank’s exposure to Asia is overblown, as only 6% of its assets are in the region.
* In the energy sector--hard hit by oil’s slide to four-year lows recently--Atlantic Richfield rose $1.56 to $75.75, Western Atlas added 44 cents to $63.19 and Dresser Industries rose $1.25 to $36.94.
But Mexico’s main stock index fell 0.5% to 4,650 on fears that lower oil prices could hurt economic growth. Mexico is a major oil producer. Finance Minister Jose Angel Gurria said Mexico will cut its 1998 budget because oil prices have been lower than estimated.
* Many telecom-related stocks advanced, led by AT&T;, up 44 cents to a new 52-week high of $65.63, and Nokia, up $4.63 to $74.
* Intel fell $1.50 to $75.44. The computer chip giant on Tuesday reported unexpectedly strong quarterly earnings but warned of weakening profit margins.
Advanced Micro Devices fell $2.44 to $18.44 amid concern that the firm won’t be able to make enough of its K6 microprocessors to compete with rival Intel.
* Zenith Electronics surged $1.88 to $7.44 after the company named a new chief executive.
In currency trading the dollar fell against the yen after Japanese officials hinted they may take additional steps to revive the economy. That helped send the Nikkei-225 stock index up 2.5%.
