Dow Rebounds 149 Despite Russian Woes
Some U.S. investors decided Monday that four weeks of falling blue-chip share prices were enough.
The Dow Jones industrial average surged 149.85 points, or 1.8%, to 8,574.85, its biggest one-day gain in two months, as investors pushed aside worries about Russia’s economic crisis and President Clinton’s legal troubles.
The broad market wasn’t as strong, however, and smaller stocks overall were mostly lower.
Still, with the Dow having fallen nearly 10% by last week from its July 17 record high, bargain hunters took control on Monday.
“The psychology of the market today is that a lot of the bad news is out,” said Michael Metz, veteran market analyst at CIBC Oppenheimer.
Meanwhile, Treasury bond yields ended mostly flat after sinking Friday to historic lows. Bonds have benefited from investors’ “flight to safety” in recent weeks, amid continuing economic turmoil in Asia, plunging stock and bond prices in other emerging markets, and worries about Russia.
Despite the Russian government’s move to devalue the ruble on Monday--joining a lengthening list of countries that have either officially or unofficially allowed their currencies to slide in value over the last 13 months--European markets did not experience big losses Monday.
Germany’s key share index inched up 0.2%. London stocks also gained.
In theory, Europe is most at risk from economic strife in Russia, including the devaluation, which will devastate average Russians’ purchasing power.
But many European markets already have pulled back significantly in recent weeks, analysts noted.
After another rocky night in Asia, where most key indexes slid again, Europe’s strength set a good tone for Wall Street on Monday.
Indeed, the dollar fell against the German mark as markets downplayed possible effects of Russia’s currency move on Germany, which has a large exposure there because of loans and direct investments.
The dollar also slipped against the yen after a Japanese official heightened speculation that central banks would use intervention to halt the yen’s fall.
In late trading, the dollar was down at 1.794 marks from 1.801 on Friday. It also fell to 145.96 yen from 146.35.
“The stock market is forward-looking, and the bad news about Russia hit the market in the past week, so people view devaluation as part of a solution to the problem,” said Alan Skrainka, chief market strategist at Edward Jones & Co., explaining what may have motivated some buyers on Monday.
“The devaluation of the ruble is actually good news,” said Arthur Hogan, chief market analyst at Jefferies & Co. in Boston. “That shows a step in the right direction by their government to get a handle on their economy.”
Still, the Dow index remains 763 points--8.2%--below its July 17 record high of 9,337.97.
“The broad market is still uneasy and drifting lower,” Metz said. “Whatever you call it, I don’t think this decline is over. Market valuations are still too high, and earnings expectations have to ratchet downward. You still see a tendency to sell on rallies, which virtually precludes the chance of an extended rebound.”
While winners topped losers by 16 to 14 on the New York Stock Exchange in typically thin trading for a summer Monday, losers had a 22-18 edge on Nasdaq .
The Nasdaq composite index surged 1.6% to 1,818.04, but that was mostly on the strength of big tech stocks.
Among Monday’s highlights:
* Leading the Dow’s advance were Merck, up $3.88 to $131.25, and Eastman Kodak, up $3.06 to $85.56.
The Dow also drew a boost from Hewlett-Packard, one of several major companies that jolted the market in July with profit warnings. HP rose $2.50 to $55.25 in advance of its latest quarterly report, which came after the close and topped Wall Street’s deflated forecasts.
* Nasdaq was led by Intel, up $3.38 to $89.56; Dell Computer, up $4.94 to $110.56; and Microsoft, up $3.06 to $107.31.
* AMR rose $3.06 to $63.44 as the second-largest U.S. airline company abandoned its latest attempt to raise leisure fares 4%, after Northwest Airlines and Trans World Airlines refused to do likewise.
Bond prices were flat, pressured in light trading by gains in stocks and the dollar’s losses against the mark and yen, dealers said.
The yield on the benchmark 30-year Treasury bond was unchanged at 5.54%.
On commodity exchanges, grain prices ended higher, helped by concern that floods in China may have damaged crops.
Market Roundup, D13
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* TOKYO TRAVAILS: Will the Nikkei again bounce from its key support level in the ‘90s? D4
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