Wall Street : Quake Propels Some Stocks as Market Seems to Stabilize

NEW YORK —  Stocks affected by the Bay Area earthquake swung the most on Wednesday although the overall stock market continued to show strong signs of stabilizing in the aftermath of Friday’s precipitous drop in the Dow Jones industrial average.

Insurance, construction, engineering and building products stocks in general rose in response to the earthquake, while shares of some California utilities, savings and loans and banks dropped.

The Dow Jones industrial average rose 4.92 points to close Wednesday at 2,643.65. The volume of shares traded dropped significantly, which market analysts said reflected renewed calm. New York Stock Exchange volume was 166.90 million shares, compared to 224.07 million shares on Tuesday and the extraordinarily high 416.29 million shares traded Monday.

The rally in insurance stocks helped the over-the-counter market show its first increase since last week. The NASDAQ composite index rose 3.35 to 463.28.

“The crisis conditions are over,” said Larry Wachtell, a market analyst for Prudential-Bache Securities, referring to the fallout from Friday’s 190-point drop in the Dow index.

In Wednesday’s trading, insurance stocks initially fell in response to fears that insurance claims from the earthquake might take a toll on earnings. But during the day, insurance industry analysts reported that insurers’ exposure to claims wasn’t severe, in part because only about one-fifth of homeowners in the Bay Area have earthquake insurance. At the same time, the earthquake, following on the heels of massive property damage in the Southeast from Hurricane Hugo, led to expectations that insurance companies will soon be able to raise their premium prices, which could boost earnings.

Merrill Lynch insurance analyst Gerald Lewinsohn recommended Wednesday that investors buy stocks of General Re Corp. and American International Group on the expectation that the quake will accelerate price rises. “You get enough of these catastrophes, enough losses accumulating, that you will get an increase in prices,” Lewinsohn said in a telephone interview.

Among insurance stocks, General Re rose 2 3/4 to close at 86 1/2, American International Group gained 3 1/4 to 102 5/8 and Aetna Life & Casualty rose 2 3/8 to 59 1/2.

Insurance brokers also showed strong gains, with Marsh & McLennan advancing 3 to 75 7/8 and Alexander & Alexander climbing 2 to close at 32.

Expectations of massive rebuilding following quake damage led to strong gains in the stocks of engineering, construction, wood-products and building materials concerns.

The quake boosted the share prices of big engineering concerns such as Fluor Corp., up 3/4 to 33 3/8, and Jacobs Engineering, up 1 1/8 to 25 3/8. But Richard Rossi, a construction industry analyst at Dean Witter Reynolds, said the quake probably will have the strongest impact on earnings of smaller, specialized firms, especially those that already have operations in California.

For example, Rossi predicted that Kasler Corp., a San Bernardino-based company that specializes in concrete pouring and highway repairs, would be called on to help repair the extensive freeway damage in the Bay Area. In over-the-counter trading Wednesday, Kasler’s shares soared 2 1/8 to 9 7/8. Los Angeles-based Calmat Co., which specializes in cement, concrete and asphalt, also showed a sharp gain in NYSE trading, closing at 28 3/4, up 2 3/4.

Morrison-Knudsen Corp., a Boise, Idaho-based engineering and construction firm with a strong presence in California, showed a strong rise of 2 3/8 to 44 1/8 in NYSE trading.

Evadna Lynn, a forest products analyst at Merrill Lynch, recommended that customers buy the stocks of companies that produce structural wood panels, such as plywood. “The industry is already overheated because of the effect of Hurricane Hugo in the Southeast and the Caribbean, and backlogs instead of the normal two weeks were already approaching six weeks” before the quake, she said. Demand in the industry was already up 30% before the quake, she said.

Among forest products companies that posted strong gains were Georgia Pacific, up 1 1/4 to 58, and Louisiana Pacific, up 1 to 40 3/4.

Some companies that offer emergency computer services to firms whose computer systems are knocked out also had a rise in their stock prices. The companies included Comdisco Inc., up 1/4 to 29 3/4, and Sungard Data Systems, up 1 3/4 to 21 1/4.

Stocks that dropped because of the earthquake generally declined because of fears about interrupted operations and repair costs. Pacific Gas & Electric fell 3/8 to 19 5/8, although the San Francisco-based utility said it didn’t expect repair and other costs associated with the quake to have much impact on earnings. Other decliners included Pacific Telesis Group, Bankamerica, Wells Fargo and California savings and loan holding companies such as H. F. Ahmanson, Calfed and Great Western Financial.

In other market news, the stock of UAL Corp., parent company of United Airlines, swung widely during the day before closing at 191 3/4, down 6 1/4. Word that an investor group had failed to raise financing for a $6.75-billion buyout of UAL had triggered Friday’s massive stock market decline.

However, AMR Corp., parent of American Airlines, pulled out of its two-day plunge and gained 3/4 to close at 74 despite the announcement Wednesday that its third-quarter earnings had fallen by almost 9%, compared to the same quarter a year earlier.

The Dow Jones transportation index, which has been pounded in recent days, fell another 6.40 to close at 1,247.87.

On the NYSE, advancing stocks outnumbered decliners by less than 5 to 4, with 822 up, 668 down and 461 unchanged.

Traders said the computer-driven program trading that had been a significant factor in the market since Friday dropped off significantly and wasn’t a big influence on prices Wednesday.

In Tokyo, the 225-stock Nikkei average gained 111.48 points, or 0.32%, to close at 35,107.56.

In London, the Financial Times-Stock Exchange 100-share index jumped 34.6 points, or 1.6%, to close at 2,170.1.