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Stocks Shoot Higher As Sharp Rebound on Tokyo Stock Exchange Spurs Rally on Global Markets;

November 17, 1997

Stocks Shoot Higher As Sharp Rebound on Tokyo Stock Exchange Spurs Rally on Global Markets; Dow Industrial Average Gains 125.74 to 7,698.22

The Dow Jones industrial average rose about 125 points to 7,698, less than 20 points shy of where it stood just before its 554-point plunge three weeks ago. Earlier in the session, the blue-chip barometer rose by as much as 166 points, nearly doubling its 170-point gain over the prior two session.

Broader stock indicators also rallied after the main stock index in Tokyo surged 8 percent amid optimism that the Japanese government will take more aggressive steps to aid its floundering economy.

Investors were also heartened by cooling tensions in the latest U.S.-Iraqi standoff and another strong day in the bond market, where interest rates eased to their lowest level in nearly two years amid new signs suggesting inflation can remain tame.

Financial stocks, hammered last week amid worries about their substantial loan portfolios in Asia and Latin America, led today’s advance. The technology sector was rebounding for the third straight session after being dragged lower over concerns about the group’s considerable Asian dealings.

The Dow’s biggest gainers were J.P. Morgan, Travelers Group, and IBM. Elsewhere on the New York Stock Exchange, Compaq Computer rose sharply as the most active issue, while Chase Manhattan and Citicorp posted big gains.

The Tokyo rally came as the Japanese central bank pledged to protect depositors following the collapse of Japan’s 11th-largest commercial bank. Investors interpreted the move as a positive sign for other Japanese banks, which are saddled with billion of dollars worth of bad loans from the collapse of real estate and stock prices in the late 1980s.

On other foreign markets, shares in Hong Kong, where the global financial crisis began last month, surged 4.6 percent. And in Europe, Frankfurt’s DAX index rose 1.7 percent and London’s FT-SE 100 rose 2.6 percent.

In economic news today, the Federal Reserve reported that demand for trucks, computers and appliances boosted production at the nation’s factories, mines and utilities by a robust 0.5 percent in October.

The increase was slightly less than expected, reinforcing hopes that the economy isn’t growing at an inflationary pace, but it pushed the industrial operating rate to 84.3 percent of capacity, the highest level in 2 1/2 years.

A continued rise in the operating rate could lead to inflationary bottlenecks as factories try to keep up with demand. Economists, however, said there’s slack capacity in other parts of the world and that U.S. investment in machinery has been growing rapidly, increasing productive capacity here by 3.9 percent from a year ago.

According to preliminary calculations, the Dow Jones industrial average rose 125.74, or 1.7 percent, to 7,698.22.

Advancing issues outnumbered decliners by a 3-to-1 margin on the New York Stock Exchange, with 2,276 up, 704 down and 481 unchanged.

NYSE volume eased from Friday’s hectic pace, but still busy with 575.95 million shares traded as of 4 p.m.

The Standard & Poor’s 500-stock index rose 17.85 to 946.20, and the NYSE composite index rose 8.82 to 494.88.

The technology-heavy Nasdaq composite index rose 30.59 to 1,614.10, giving it a three-session rebound of nearly 5 percent.

The Russell 2000 index of smaller companies rose 7.24 to 435.65, and the small-company dominated American Stock Exchange composite index rose 6.38 to 679.00.

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