Drug Shares Lead U.S. Rally; Rupiah Dives
Wall Street advanced Tuesday for the fifth time in six sessions, boosted by talk of a mega-merger in the drug business and by some healthy corporate earnings reports.
The Dow Jones industrial average rose 119.57 points, or 1.5%, to 7,873.12, its biggest gain since Dec. 30. Winners topped losers by 2 to 1 on the New York Stock Exchange in active trading.
Meanwhile, in Asia early today, the Indonesian rupiah plunged 15% to a record low of 12,000 to the dollar, as investors rejected President Suharto’s plans to run for a seventh term.
But Indonesian stocks rallied nonetheless early today, although other Asian markets were mixed, as they were Tuesday. The recently hot South Korean market was hit by profit-taking early today, with the main index down 5.2% by midday, at 505.61.
On Wall Street, blue chips were swept higher Tuesday amid rabid buying of major drug stocks on news of merger talks between SmithKline Beecham and American Home Products.
Strong earnings reports from some big-name firms also boosted sentiment. “We’re starting to see some decent earnings numbers,” said Guy Truicko, equity portfolio manager at Unity Management in Lake Success, N.Y. “So far it looks very positive.”
A total of 106 companies in the Standard & Poor’s 500 have reported earnings for the quarter ended Dec. 31. Of them, 43% topped expectations, 26% fell short of estimates and the rest were in line.
But at this point last quarter, about 55% of companies had topped forecasts and 25% were below.
Stocks also may have been helped Tuesday by Federal Reserve Bank of Minneapolis President Gary Stern, who said it is “less likely” the central bank will raise interest rates in coming months because cheap Asian imports will keep U.S. inflation in check.
The bond market, however, didn’t take any comfort from Stern’s comments. Long-term yields rose to their highest level since Dec. 31. The 30-year Treasury bond yield ended at 5.84%, up from 5.80% on Friday.
Traders said interest in bonds is waning as the stock market continues to recover.
In the broad market, winners topped losers by 26 to 17 on Nasdaq. The Nasdaq composite index jumped 1.7%, while the Russell 2,000 index of mostly smaller stocks rose 1.2%.
Year-to-date, the Dow average is down 0.4%, while the Nasdaq index is up 1.3%.
In foreign trading Tuesday, Japanese stocks rose 0.6% to 16,366, as the dollar fell against the yen for a sixth day. Japanese Finance Minister Hiroshi Mitsuzuka said the government will consider new steps to lift the faltering economy.
Among Tuesday’s highlights:
* American Home soared $13.56 to $94.25 and SmithKline gained $2.56 to $59.56. Among other drug firms, Merck leaped $5.75 to $115.50, Pfizer rose $3.81 to $80.81 and Warner Lambert shot up $9.13 to $138.25.
* Stocks reacting positively to earnings reports included Lucent Technologies, up $5.56 to $81; Continental Airlines, up $3.13 to $52.75; Burlington Northern, up $3.88 to $88.88; and Diebold, up $1.56 to $46.88.
Stocks falling on earnings news included several major financial issues. J.P. Morgan and Merrill Lynch both said they earned less last quarter from trading bonds and other securities in Asia. Merrill shares lost $1.81 to $65 and J.P. Morgan eased $1.63 to $105.25.
* Entertainment stocks were sharply higher, with News Corp. up $1.44 to $25.19, NBC parent GE up $2.19 to $75.56 and Disney up $3.25 to $99.38.
* Apria Healthcare fell $2.25 to $9.25 after its chief executive and two other top managers quit and the firm warned of weak earnings.
* Diamonds, a newly created unit investment trust designed to mimic the performance of the Dow Jones industrial average, sparkled in its first day of trading. With 1.7 million shares changing hands, Diamonds’ shares were the third-most widely traded stock on the American Stock Exchange and the most hotly traded new issue in Amex history. The trust closed at $78.81 a share.
Market Roundup, D12
