Stocks rise as global markets stabilize and on encouraging news of noninflationary economic
Oct. 31, 1997
Stocks rise as global markets stabilize and on encouraging news of noninflationary economic growth
NEW YORK (AP) _ Stocks ended a turbulent week with gains today as financial markets stabilized around the world and an encouraging fresh sign of noninflationary growth appeared at home.
Once more, there were wide swings. But while markets haven't completely settled down, the pace of trading activity cooled off another notch.
The Dow Jones industrial average surged up 114 at the opening, then slipped to a loss of almost 29 points before heading back up about 100 points again. Wall Street's best-known indicator closed up 60.41 at 7,442.08. Broader market indexes also were higher.
Volume on the New York Stock Exchange, while heavy, was down from Thursday.
Trading began on an unusual note: The opening bell at the NYSE was rung by China's visiting president, Jiang Zemin, who grinned, flashed a thumbs-up and shouted from a balcony to traders below, ``Good morning! I wish you good trading!''.
There was selling in the morning as traders viewed the market's initial upward spike as an opportunity to cash out and recover a bit from Thursday's setback, when the Dow fell 125.00 points to 7,381.67. Even with today's gain, the Dow had dropped almost 593 points, or 7.4 percent, since Oct. 23, when the global freefall began.
Among the bright spots today was a calming of global markets, with major indexes rising in Asia and winding up little changed in Europe. An International Monetary Fund bailout package for Indonesia, with the United States joining the rescue effort with a commitment of its own, also helped bolster confidence.
In addition, there was a government estimate that the U.S. economy managed sound 3.5 percent growth in the third quarter without stirring up inflation. An inflation measure linked to the gross domestic product had its smallest rise since 1964.
Even if the market's recent behavior has not yet become comforting, at least Wall Street's mood swings seem to be turning less violent.
With 1.6 billion shares changing hands Thursday on U.S. stock markets _ leisurely compared with Tuesday's record-busting 2.83 billion, but still the 11th busiest day in history _ analysts said it was significant that Thursday's decline never snowballed into another full-blown selling frenzy.
``Some people would find (Thursday's drop) disturbing, but at same time it's not untypical of a market's reactions a couple of days after a very sharp decline and a very sharp rally,'' said Eric Miller, chief strategist at Donaldson, Lufkin & Jenrette Securities, referring to Monday's 554-point plunge by the Dow and Tuesday's 337-point rebound. The Dow nudged up 8 points Wednesday.
The biggest damage Thursday was incurred among the shares of technology companies, which have a greater stake in Southeast Asia's crumbling fortunes than other industries. The technology-laden Nasdaq Stock Market fell 2 percent on Thursday.
``People are having a difficult time getting a clear idea about each company's specific exposure to Asia,'' said Robert Streed, senior investment adviser at Northern Trust in Chicago. ``We know technology companies have more exposure, so technology companies are being painted with a broad brush. They rounded up the usual suspects and took them out to shoot them this morning.''
Compounding the lingering concerns over Asia were mounting jitters over Latin America, where several developing nations roiled world financial markets about three years ago with their own fiscal crises.
Most world markets stabilized today, taking the lead from Hong Kong and Japan, which bounced back from morning losses.
In Hong Kong, where the global financial crisis began last week, the main stock market index rose 2.5 percent. Tokyo's key index gained 0.57 percent.
London posted a 0.8 percent gain, while French and German stocks were a fraction lower.
Regardless of the global economic picture, business conditions remain vigorous in the United States. New government reports released Thursday showed fewer claims for unemployment benefits and strong demand for new homes.
On Wednesday, Federal Reserve Chairman Alan Greenspan calmed some nerves by saying the market's slide could prolong the nation's 6 1/2 year economic expansion by slowing the economy to a more sustainable pace. His remarks bolstered hopes the Fed won't raise its short-term interest rates to slow borrowing and spending as protection against inflation.
The U.S. outlook also improved with another strong day in the Treasury bond market, which has become a safe haven for investors who've pulled their money out of stocks. As bond prices rose Thursday, long-term borrowing costs eased back toward Monday's 20-month low.
The dollar hasn't faired as well amid all the turmoil, with foreign exchange traders seeking refuge in the currencies of Switzerland and Germany, which are seen as having less exposure to Asia's financial problems. This week, the dollar has lost 5 percent of its value against the Swiss franc and 3 percent vs. the German mark.