Stocks Rally on Post-Election Optimism
Stocks rose Wednesday after a strong election showing by Democrats raised expectations that impeachment efforts will run out of steam and enable President Clinton to focus more on the U.S. economy and the global financial crisis.
The Dow Jones industrial average rose 76.99 points to 8,783.14, its highest close since Aug. 3, having regained ground lost in a bout of late afternoon selling that had almost erased earlier gains. During the session, the Dow had advanced as much as 148.30 points and climbed back above 8,800 for the first time in more than three months.
Bonds prices suffered their biggest decline in almost a month, driving yields to an eight-week high as rallying stocks sapped demand at the Treasury’s $12-billion note sale.
“It’s a double whammy,” said Michael Mullaney, who helps oversee more than $1 billion at Boston Partners Asset Management. “There’s a ton of paper hitting the street and stocks look like they’re stabilizing--the flight to quality is not there.”
The yield on the benchmark 30-year T-bond rose to 5.33% from 5.21% on Tuesday.
The Standard & Poor’s 500-stock index climbed 7.83 points, or 0.7%, to 1,118.67. The technology-heavy Nasdaq composite index jumped 35.14 points to 1,823.57.
Advancing issues outnumbered decliners by a 2-1 ratio on the New York Stock Exchange, where volume was 861.19 Million shares.
The NYSE composite index rose 3.34 points to 555.14. The Russell 2,000 index of smaller stocks rose 5.40 points to 392.96.
“The election should give Clinton more authority and make the dollar more attractive,” boosting the appeal of U.S. stocks and bonds to international investors, said John DeBeer, director of fixed income at Loomis & Sayles, which oversees $43.2 billion.
The dollar climbed to 116.60 yen from 115.33 on Tuesday.
Benchmark stock indexes gained around the world. Japan’s Nikkei-225 stock index rallied 4%, Britain’s FTSE-100 rose 2%, Mexico’s Bolsa index gained 3.4% and Brazil’s Bovespa added 2%. Asian markets gained after Morgan Stanley Dean Witter & Co. turned bullish on the region, almost doubling its weighting of Japanese stocks and bulking up on Hong Kong, Singapore and Thailand in its model international portfolio.
The dramatic market gains in Japan, especially among bank stocks, fueled optimism that that country’s banking reform measures may succeed in helping to ease Japan’s economic problems and thus also help the rest of Asia.
“For companies that view Asia as a major market, that bodes well for them,” said John Shaughnessy, chief investment strategist at Advest Inc. in Boston. “If indeed the Asian contagion is being contained, that means the U.S. economy is protected to a greater degree.”
Among Wednesday’s highlights:
* Intel, the world’s largest maker of microprocessors, rose $4.38 to $94.81, after the Semiconductor Industry Assn. reported that worldwide chip sales rose to $10.2 billion in September from $9.8 billion in August. The rise sparked speculation that this year’s slump may be abating amid improving sales of personal computers and networking and communications equipment.
Micron Technology jumped $3.56 to $43.75 and Altera rose 4 to $44.75.
* Cisco Systems, the world’s top maker of computer-networking equipment, rose $2.19 to $65.56. After the close of trading, the company reported quarterly earnings slightly above estimates.
* J.P. Morgan surged $7.63 to $101.75 on renewed speculation of a possible bid for the company. Other Dow winners included American Express, up $3.56 to $94, and Hewlett Packard, up $3.13 to $63.
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Market Roundup, C7
