Stocks Rally for 2nd Session; Dow Gains 149
In a sign that Wall Street’s recent downturn might be over--at least for the moment--the stock market closed up strongly Monday for a second straight session.
The Dow Jones industrial average rose 149.85 points, or 1.9%, to 7,945.35. Following Friday’s nearly 180-point gain, some analysts said the two-day rally suggests the market has finally stabilized after giving up almost 20% the last two months.
Although the Dow had scored some huge one-day point gains in recent weeks, they were inevitably followed by sell-offs the next day.
Not this time. In fact, the Dow hasn’t enjoyed two back-to-back daily gains this strong all year. The last two-day gain that came close was a 290-point rise over Aug. 17-18.
Few Wall Streeters believe stocks are poised for another double-barreled rise. But the sustained strength over the last two sessions has encouraged some that stocks are probably entering a “trading range” for the time being.
“It’s certainly not ironclad” evidence for an extended rally, said Richard McCabe, chief technical analyst at Merrill Lynch & Co. “But the good stuff outweighs the bad stuff by a little” in this two-day rebound.
Indeed, the broader market also was strong Monday: The Standard & Poor’s 500-stock index rose 20.66 points, or 2.1%, to 1,029.72. The Nasdaq composite improved 24.05 points, or 1.5%, to 1,665.69.
But small stocks continued to lag, with the Russell 2,000 index moving up 4.10 points, or 1.2%.
Monday’s rally, like Friday’s, stemmed in part from the conclusion on Wall Street that independent counsel Kenneth W. Starr’s report contained no damaging new revelations that would force President Clinton to resign or lead to his impeachment.
Investors also were buoyed by an overnight rally in foreign markets and a belief among some analysts that the Federal Reserve Board will cut short-term interest rates at its Sept. 29 meeting.
To many Wall Streeters, the market now appears to be headed for a trading range in which stocks bounce between two points--roughly, some analysts say, between 7,500 and 8,500 on the Dow.
Investors who have been waiting for the market to stabilize now may venture back into stocks. But the gains will be hindered by the fact that most longer-term concerns, such as badly ravaged economies overseas, are still in place.
“The market is still trying to sort through the pluses and minuses,” said Christine Callies, chief strategist at CS First Boston. “For some two-day periods, the market will go straight up. For some two-day periods, it’ll go straight down. That’s the more likely [pattern] going forward than a one-way market in either direction.”
Throughout the downturn that started after July 17, the Dow staged several one-day rallies, most notably its record 380-point gain Sept. 8. But before Monday, the index had pieced together back-to-back up days only four times--and none topped the almost 330 points gained in the last two sessions.
Advancing stocks led decliners by a 2-1 margin Monday on the New York Stock Exchange, after leading by 3-2 on Friday.
Financial services stocks, which have suffered some of the biggest losses in recent weeks, led Monday’s rally, alongside drug issues.
Citicorp rose $5 to close at $101, while American Express gained $5.31 to $81.69.
A number of Wall Street’s so-called technical analysts, however, expect the market to retest its recent lows later in the year.
One worrisome note Monday: On the NYSE, only 23 stocks made new 52-week highs, compared with 166 touching new lows.
Given the extent of the market’s decline since mid-July, it’s not surprising that so few stocks are making new highs. But the number of new lows would have to contract noticeably for the market to notch a concerted recovery, many analysts say.
“I’d really like to see that new-low list dry up, and I mean really dry up, to 50 or less” McCabe said. The high number “really bothers me.”
Monday’s NYSE trading volume also was below its recent levels. At 714 million shares, volume was less than the 729-million average since July 17 and below the 819 million shares traded Friday.
“It was a good day, but to get something going substantially higher, we’ve got to pick it up” in volume, said Gregory Nie, a technical analyst at Everen Securities Inc. in Chicago.
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Markets around the world also rallied Monday. Brazil’s Bovespa index soared 7.8%, following a 13.4% gain on Friday. That followed several weeks of heavy losses, including an almost 16% drop last Thursday.
In Asia, Japan’s Nikkei-225 index was up 2.2%. European markets registered gains, with France’s CAC-40 index surging 3.8%, while markets in Britain and Germany each rose almost 3%.
Meanwhile, bond yields remained virtually unchanged as traders waited for more signals as to the Fed’s probable next move with interest rates.
Speculation continues that countries around the world might move to slash rates in a coordinated effort after Clinton, in a speech to the Council on Foreign Relations, called on other nations to stimulate their economies now that the threat of inflation has been replaced by the threat of deflation.
An indication of how the Fed might act later this month could come Wednesday when central bank chief Alan Greenspan and Treasury Secretary Robert E. Rubin testify before the House Banking Committee on global financial problems.
Among Monday’s highlights:
* Brokerage stocks rallied as investors jumped into the beaten-down group. Merrill Lynch picked up $1.63 to $57.63, Lehman Bros. gained $3.31 to $39.13 and Morgan Stanley Dean Witter advanced $2.13 to $53.13.
* Drug stocks were strong, with Merck up $4 to $132.31 and Lilly up $1.31 to $76.19. Doctors at a European meeting said their drugs offer hope for treating osteoporosis.
* Airline shares surged after an article in Barron’s magazine argued that the stocks are cheap. Delta rocketed $8.75 to $104.13; US Airways gained $3.19 to $54.13.
* Auto stocks also attracted bargain hunters. Ford jumped $3 to $46.31; GM rose $3 to $59.44.
* On the downside, telecom equipment firm Tellabs plunged $7.31 to $37.69 after warning of earnings weakness and scrapping plans to buy Ciena, which fell $2.75 to $13.19.
