Wall St. Breathes Easier After Starr Report; Dow Rises 179
The stock market staged a classic “relief rally” Friday as investors moved back into stocks on the assumption that independent counsel Kenneth W. Starr’s report would not force President Clinton from office.
Encouraging news from Intel on Thursday, as well as from American Express and Citicorp on Friday, also played big roles in pushing up stocks.
The Dow Jones industrial average rose 179.96 points, or 2.4%, to 7,795.50. The Nasdaq composite index jumped 56.31 points, or 3.6%, to 1,641.64.
Friday’s gain followed two days of heavy selling in which Wall Street recoiled at the prospect of a prolonged impeachment showdown between Clinton and the Republican-controlled Congress.
The market reversed an early-morning loss when Clinton issued his most extensive apology to date.
It may be too soon to gauge the market’s final reaction to the Starr report because traders had only limited time to peruse the document following its midafternoon release on the Internet. A more complete response will come Monday after investors spend the weekend dissecting the details.
Nevertheless, barring a major surprise, many investors said the market already accounted for Clinton’s woes in its losses Wednesday and Thursday.
“We spent two days worrying about a potential impeachment,” said Jeffrey Applegate, chief investment strategist at Shearson Lehman Bros. “Now the report is out and there was no big surprise relative to the expectations. There is still no smoking gun or ironclad impeachment event.”
Friday’s gains capped an improbable week on Wall Street. On Tuesday, the Dow rose more than 380 points, its biggest one-day point gain ever (though a relatively modest increase in percentage terms). The blue-chip index lost a cumulative 405 points in the next two days, but its pickup Friday left the Dow with a 2% gain for the week--its best one-week showing since the correction began in mid-July.
Some experts were buoyed by the fact that the Dow hit a low of 7,539.07 on Aug. 31 but remained above that level this week, despite subsequent sell-offs.
Few experts think the rally will linger much into next week. The bevy of economic problems that initially triggered the correction still exist. What’s more, in the next several weeks companies will begin issuing so-called earnings pre-announcements, in which they often divulge bad news on their profit outlook.
“It’s going to be a limited rally,” said Richard Cripps, chief market strategist at Legg Mason Inc. in Baltimore. “But what will be important technically is the market [must hold] above the lows.”
Though advancing stocks on the New York Stock Exchange led decliners by a 3-2 margin, 713 stocks dropped to new 52-week lows while only 38 hit new highs.
In keeping with recent heavy volume, 823 million shares were traded on the NYSE.
Treasury bonds suffered a bit as investors switched money into stocks. The yield on the 30-year T-bond rose to 5.23%, from 5.20% on Thursday.
Most Asian markets were hit by selling. In Japan, the Nikkei-225 index fell below 14,000 for only the second time in 12 years, in part because a gloomy outlook for earnings at Toshiba added to worries about the economy. The Nikkei fell 5.1%. Stocks slipped 3.5% in Hong Kong and 5.4% in South Korea.
Latin American markets were mixed. Brazil surged more than 13% after tumbling nearly 16% a day earlier. Stocks also rose 6.8% in Argentina, but fell in Chile and Peru.
For a day at least, stocks got a welcome dose of good news from several leading companies. The most important was semiconductor giant Intel, which said its third-quarter revenue will rise 8% to 10% over the second quarter. Previously, Wall Street had expected flat sales. Intel shares soared $5.88 to $84.94.
The Intel news could be a sign that chip and personal computer companies, whose sales have been hurt by the Asian financial crisis, are finally beginning to see a rebound.
Shares of Oracle, another large Nasdaq-listed company, surged $3.38, or more than 15%, to $25.50. The database software maker’s first-quarter earnings rose more than 30%, beating analyst estimates by 4 cents.
American Express leaped almost 13% after management said the impact from the breakdown in world financial markets has been “relatively modest.” The company’s stock jumped $8.88 to $78.38.
Citicorp climbed $7.75, or 8.8%, to $96. James Dimon, president of Travelers Group, said his company will move ahead with its plan to buy Citicorp despite drops in both stock prices.
Among Friday’s highlights:
* OfficeMax shares leaped $2.06, or 23%, to $11 after the third-largest U.S. retailer of office supplies said it’s in talks about a possible merger with another company. OfficeMax would reveal neither the company involved nor whether it would be the buyer or the seller.
* Dole Food, headquartered in Westlake Village, fell $5.75, or 14.3%, to $34.44 amid concern that the giant fruit company’s sales will drop sharply in Russia because of that country’s woes. The company sells about 5% of its fruit there.
* Adobe Systems rose $1.19, or 4.4%, to $28 after the top maker of desktop graphics software reported third-quarter profit above lowered expectations.
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Summertime Blues
Most of the U.S. stock market’s recent plunge occurred in two periods--the end of July and the end of August--each followed by a period of volatility. From June 1 to its peak on July 17, the Standard & Poor’s index of stocks of the largest U.S. companies rose almost 9%, and has fallen 15% since then. Daily closes since June:
July 17: Highest close ever at 1,186.75
Friday: 1,009.06
Source: Bloomberg News
