Falling Oil Prices, Rising Euro Give Stocks a Lift

Stocks rebounded dramatically from a dismal opening Friday, as Intel’s sales-warning bomb appeared to be offset by the good news of falling oil prices and a rebounding euro.

Although flagging corporate sales and earnings remain a concern, some analysts thought the late surge of buying Friday might mark the end of the market’s brief slump and perhaps presage an autumn rally.

Indeed, St. Louis brokerage Edward Jones raised the weighting of tech stocks in its recommended portfolio, betting that they have been beaten down to the point that they’re ready to bounce back, said chief market analyst Alan F. Skrainka.

The Nasdaq composite, down 214 points, or 5.6%, at Friday’s opening, ended the day down only 25.11 points, or 0.7%, at 3,803.76. The Dow Jones industrial average, off 144 points at the outset, rallied to close up 81.85 points, or 0.8%, at 10,847.37.

More stocks still fell than rose, with losers topping winners by 11 to 9 on Nasdaq. But in the wake of Intel’s plunge--down $13.55, or 22%, to $47.94 a share--the tech sector fared remarkably well.

Many tech issues that fell late Thursday with Intel rebounded Friday. Winners included Hewlett-Packard, up $9.19 to $104.19; IBM, up $2.38 to $123.88; Sun Microsystems, up $1.63 to $118.06; and EMC, up $7.19 to $102.94.

Though many tech stocks still are far below their winter peaks, Intel’s pounding probably represents the “last remnants of speculative excess being squeezed out” of the sector, Skrainka said. In that sense, it makes tech shares much more appealing, he said.

Intel’s plunge was accompanied by the heaviest one-day trading volume for a single issue in U.S. stock market history, with 308 million shares changing hands. It was also Intel’s biggest one-day loss ever, surpassing its 19% slide in the 1987 stock market crash.

The stock market got two big boosts from another sector Friday--the government.

First came news that central banks in the United States, Japan, Canada and Europe intervened in currency markets to support the stumbling euro. The euro jumped from 85.8 U.S. cents Thursday to 87.9 cents Friday.

A stable euro could reignite the European economy and also boost U.S. exports, economists said. Intel, for one, blamed unexpectedly low demand in Europe for a major part of its sales weakness.

Later Friday, the Clinton administration said it will release 30 million barrels of oil from its strategic reserve over the next 30 days to help push down oil prices. Crude oil prices, partly in anticipation of the move, dropped 4% to a one-month low on the New York Mercantile Exchange.

Crude for November delivery closed at $32.68 a barrel Friday down from a 10-year high of $37.80 on Wednesday.

“On oil and the euro, the worst is probably behind you,” said Charles S. Lemonides, chief investment officer at M&R; Capital Management in New York. Lemonides, unlike Skrainka, thinks tech stocks have farther to fall, but he is optimistic longer term and is bullish about other industries, particularly financial services.

Falling oil prices and a slowing economy should mark an end to the Federal Reserve credit-tightening campaign that began in June 1999, and that in turn should boost banks and other interest rate-sensitive stocks, he said.

Abby Joseph Cohen, Goldman Sachs & Co.’s influential strategist, told clients Thursday that fears about energy prices and the euro were “overdone” and that the U.S. economy remains strong enough to power the broad market to additional gains by year-end.

As for technology, “the hallmark of the whole correction is time,” said Charles Pradilla, chief investment strategist at S.G. Cowen in New York.

Valuations, although still high for many tech names, have come down sharply from their peaks, possibly setting the stage for a sustainable rally next year, he said.

Among Friday’s highlights:

* The move to prop up the foundering euro gave a boost to companies that do a lot of business across the Atlantic. A stronger euro means the profits these companies earn on the Continent will be worth more when they’re converted into dollars.

Among the winners were McDonald’s, which rose $1.69 to $28.69; Gillette, up $1.50 to $30.38; and Coca-Cola, which climbed $3.31 to $52.88.

Drug stocks also were big winners, as were biotech issues. Merck gained $3.06 to $73.19; Amgen surged $3.63 to $72.06.

* Energy stocks, which have rallied along with oil prices this year, slipped Friday as oil prices fell. Chevron was down $1.06 at $84.25, Texaco lost $1.13 to $50.88 and Phillips Petroleum fell $2.21 to $61.48. Oil field shares also slid. Halliburton dipped 96 cents to $47.43, ENSCO International fell $1.20 to $35.29 and Schlumberger was down $1.39 at $79.17.

Market Roundup, C4-5