Dow Rebounds 152 on Hints of International Cooperation
Wall Street stocks staged a sharp turnaround Friday, rallying on signs that governments were nearing agreements on new ways to address the world financial crisis.
The dollar closed slightly higher against the yen.
Bond yields continued to move to historic lows after a weaker-than-expected report on U.S. payrolls added evidence of a slowing U.S. economy. The report was seen as bolstering the case for further monetary easing by the Federal Reserve Board, which cut interest rates Tuesday.
The Dow Jones industrial average gained 152.16 points, or 1.99%, to finish at 7,784.69, reversing a third of the blue-chip average’s 448-point loss incurred over the last two days.
Travelers Group rose $2.81 to $38.56 and J.P. Morgan rose $2.50 to $83.50 to help lead the Dow, which also drew a boost from Chevron, up $3.63 to $87.63, and Procter & Gamble, up $3.81 to $74.94.
One catalyst for the stock market’s turnaround was a proposal from President Clinton, who in the morning introduced an initiative to provide emergency funding for countries affected by the global turmoil in the hope of forestalling a global recession.
The initiative came a day ahead of the annual meeting of the Group of 7 top industrial nations in Washington and followed news that Japan’s lower house of Parliament passed a set of financial-stabilization bills designed to deal with that country’s banking crisis.
Later in the day, Treasury Secretary Robert E. Rubin held a news briefing in which he suggested that other nations had already shown interest in the Clinton plan.
In all, the developments helped reassure a market fraught with recession fears that governments might yet muster a response to the economic and financial markets turmoil.
“There seemed to be about a dozen things that mosaically pieced together helped,” said Philip Orlando, chief investment officer of Value Line Asset Management. “This G-7 is potentially very important now because policy decisions are going to be what serve as a catalyst for any recovery.”
The Labor Department reported that nonfarm U.S. payrolls increased just 69,000 in September, compared with the 187,000 economists had expected, the lowest since January 1996.
The news sparked renewed buying in bonds and was immediately seized upon as evidence that the Fed would have to continue easing monetary policy beyond its quarter-point rate cut this week.
The benchmark 30-year Treasury bond yield fell to another record low, 4.84%, compared with 4.88% on Thursday.
The dollar ended at 135.65 yen, compared with Thursday’s 135.63.
Gold rose 90 cents to $300.50 an ounce in New York. Crude oil for November delivery gained 21 cents a barrel to $15.64.
In London, the FTSE-100 closed down 3.22%. Frankfurt’s DAX-30 index also fell, by 6.25%. Tokyo’s Nikkei index edged up 0.2%.
Among Friday’s market highlights:
* BankAmerica rose $1.38, or 2.6%, to $55.06 after Chairman and Chief Executive Hugh McColl Jr. said the company, which completed its merger with NationsBank this week, is considering buying more banks, the Wall Street Journal reported. BankAmerica will most likely buy in regions where it has little presence and can gain prominence with just one acquisition.
* Bergen Brunswig rose $1.19, or 2.4%, to $51.13 as the third-largest drug wholesaler in the U.S. completed its purchase of closely held Ransdell Surgical for an undisclosed price to expand its sales of medical and surgical products.
* Lockheed Martin rose $7.25, or 7.4%, to $105.31 as the second-largest defense and aerospace company in the U.S. received a $2.05-billion, seven-year contract from the Air Force to maintain the F-117 stealth fighter, known as the Nighthawk, which Lockheed Martin also built.
* McDonald’s fell $1.88, or 3.1%, to $58 on concern that the world’s largest restaurant company’s exposure to weakening international markets could hurt earnings. McDonald’s was also downgraded to “outperform” from “strong buy” by analyst Howard Penney at Morgan Stanley Dean Witter.
