Stock rally defies war, other crises Experts see signal of recession's end


"These are the times that try men's souls," said Thomas Paine in 1776.

His words are equally applicable to conditions in 1991.

The country is at war. Banks and savings institutions have been failing. Unemployment is on the rise. The massive debt piled up in the 1980s is taking a heavy toll on the federal government, on corporations and on individuals in the early 1990s. Corporate profits are shrinking.

Why, then, is the stock market surging?

"Markets are anticipatory by nature and have become increasingly that way in recent years," observed J. Anthony Boeckh, editor of the influential Bank Credit Analyst of Montreal, which keeps a close watch on the U.S. economy and the securities markets.

Having been sour on stocks for many months, the publication now finds the outlook "improving."

Historically, the trend of stock prices often has reflected economic developments several months ahead. That precedent helps explain the market rally that began in October, faltered in early January and resumed with the opening shots of the Persian Gulf war.

Since the rally began Oct. 11, the Dow Jones industrial average has risen about 21 percent. The gain since the outbreak of war Jan. 16 is more than 15 percent.

"The market is not a perfect predictor," said William LeFevre, pTC strategist for Advest Inc. in New York and a close follower of the Dow Jones averages. "But it tends to bottom out three to eight months in advance of the end of a recession. This has been true in nearly all of the 11 recessions -- one of them a depression -- since 1930. That indicates that we'll begin coming out of the present recession either this month or in the spring."

A. Marshall Acuff, investment strategist for the Wall Street firm of Smith Barney, said that "the market in 1991 will reflect prospects for 1992." There are several assumptions underlying that outlook, he said.

"The economy will begin to recover by midyear, and an end to the Persian Gulf War in a reasonable period of time would reinforce the prospect of a business recovery commencing," he said. "Profit comparisons will begin to improve in the second quarter, and earnings will rise 12 percent in 1992 and again in 1993."

Among Dow components, though less than one-third of 30 stocks on the list posted full-point gains in early trading, that proportion expanded to two-thirds by the close.

Gainers included IBM, up 2 7/8 at 132 3/8 , Alcoa, up 3 1/8 at 68 3/8 , Merck, up 2 7/8 at 100 3/8 , 3M, up 3 1/4 at 90 5/8 , and Philip Morris, up 2 3/8 at 61 5/8 .

Among industry groups, money-center banks and drug stocks were beneficiaries of yesterday's across-the-board rally.

Among the big banks, Wells Fargo jumped 3 1/2 , to 74 3/4 , while BankAmerica rose 1 3/4 , to 33 5/8 , and gains of a point or more were realized in 13 other big banking issues.

Among drug stocks, Pfizer surged 3 1/4 , to 99 7/8 ; Syntex 3 1/4 , to 72 1/8 ; and Bristol-Myers Squibb 2 7/8 , to 75 3/8 .

Among aerospace and defense issues, McDonnell Douglas surged 3 5/8 , to 47; Loral 1, to 40 1/2 ; Raytheon 1 7/8 , to 76 7/8 ; and Litton 1 1/2 , to 83 1/2 .

The Dow transportation index was up 23.80 at 1126.06, buoyed by a 2 3/8 gain, to 60, by AMR Corp.; a 2 3/4 rise, to 43 3/8 , by Federal Express; and a 2 1/2 advance, to 75 1/2 , by Delta. USAir rose 1/2 , to 21 1/4 , despite yesterday's announced restructuring plan, which includes slashing 268 flights and furloughing more than 3,500 employees.

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