Dow Soars 219 After Brazil Floats Currency

Stocks rallied Friday to snap a four-day losing streak, bolstered by Brazil’s decision to let its troubled currency float on foreign-exchange markets. The move raised hopes that the financial turmoil in Brazil and elsewhere in Latin America might abate more quickly.

The Dow Jones industrial average surged 219.62 points, or 2.4%, to 9,340.55, to recapture a big chunk of its losses suffered over the previous four days, when Brazil’s growing currency woes--and considerable profit-taking in stocks--weighed on the market.

The blue-chip average had tumbled 522 points, or 5.4%, over that span after reaching a record high 9,643.32 on Jan. 8.

The broader market, as measured by the Standard & Poor’s 500 index, gained 2.6%, and the technology-laden Nasdaq composite index climbed 3.1% in advance of a three-day weekend for investors. U.S. markets are closed Monday in observance of the Martin Luther King Jr. holiday.

Brazil’s currency actions also sparked a dramatic rally on the Brazilian stock market in Sao Paulo, where the benchmark index soared 33%, and on other Latin American markets. Key averages in Mexico and Argentina jumped 7.8% and 12.3%, respectively.

On the New York Stock Exchange, the gainers were led by the American depositary receipts of Brazilian and other Latin American stocks, along with banking, computer, networking and telecommunications shares.

Nearly three stocks rose for every one that fell on the Big Board, where trading volume totaled 798.2 million shares, up slightly from 797.2 million on Thursday.

One sector, though, was largely absent from the rally: Internet stocks. Some of the group’s leading issues, such as Yahoo, slipped for a fourth straight session after having skyrocketed in recent weeks.

Treasury bond prices, meantime, turned lower to end three days of gains, as the improved outlook in Brazil reduced the bonds’ role as a haven for investors. In turn, the 30-year benchmark yield edged up to 5.11% from 5.06% late Thursday.

Stocks rose from the opening bell after Brazil allowed its currency, the real, to float to help ease the financial crisis in the world’s ninth-largest economy and the largest economy in Latin America.

Brazil earlier this week devalued the real but was still struggling to support the currency even at its lower levels. The devaluation also proved ineffective in stopping a plunge in stock prices, a surge in credit costs and a flight of capital out of the country that threatened to send Brazil into a meltdown.

“The strategy to defend the real was to hike interest rates, which was even worse for the economy,” said Alan Skrainka, chief market strategist at Edward D. Jones & Co. in St. Louis.

After being allowed to float, the real quickly plummeted more than 10% against the U.S. dollar. But it recovered somewhat and closed at 1.46 to the dollar, a 9% loss on the day.

Brazil’s move also sent Brazilian interest rates lower, which ultimately could mean a quicker end to its economic troubles, said Rao Chalasani, investment strategist for Everen Securities Inc. in Chicago.

A more stable Brazil also reduces the potential for economic crises throughout Latin America. “There’s less fear of a domino effect, of one emerging market after another collapsing,” said Michael Schroer, chief investment officer at Renaissance Investment Management in Cincinnati.

Financial services stocks rebounded as fears ebbed of additional major loan losses in Brazil. Chase Manhattan gained $2.63 to $70.88, J.P. Morgan jumped $6.75 to $108.75 and American Express soared $8.38 to $104.38.

On the NYSE’s most-active list, Compaq Computer rose $2.06 to $46.63, Cendant gained $1.25 to $20.75 and General Electric was up $3.69 at $100.75 a share.

Elsewhere, Motorola rose $2.38 to $68.88 one day after the company posted better-than-expected earnings. And Platinum Technology plunged $5.31, or 28%, to $13.38 on the Nasdaq market after the software and services concern said its 1999 earnings would fall short of current estimates.

For the week, the Dow lost 3.1%, while the Nasdaq composite gained 0.2%.

Times wire services were used in compiling this report.