NEW YORK -- U.S. stocks, helped by rebounds in Merck & Co. and Johnson & Johnson & Co., rallied out of a three-day slump yesterday as investor concern about Russia's political turmoil and the battered drug industry dissipated.
"It's a combination" of gains in health-care stocks "and a feeling there's a reprieve in Moscow" from Russian President Boris N. Yeltsin's battle with legislators, said Robert Stovall, president of Stovall/Twenty-First Advisers.
"Drug stocks are bouncing, and we're coming off an oversold market," said Anthony Dwyer, chief investment strategist at Sherwood Securities. Merck, for example, closed at $35.375, up 62.5 cents.
The Dow Jones industrial average rose 15.94 points, to 3,461.32. The average tumbled 16.48 points Wednesday after drug industry leader Merck & Co. warned of slower-than-expected earnings growth.
Broad market indexes also gained. Standard & Poor's 500 Index climbed 2.81, to 450.88, while the Nasdaq Combined Composite Index advanced 6.65, to 681.01.
Investors also were encouraged by Senate passage of a budget that calls for bigger spending cuts than proposed by President Clinton, traders said. "Senate support for Clinton's budget helped" the stock market, said Steven Van Brunt, vice president of equity trading at Nikko Securities. Last week, the House passed a plan to reduce the deficit by $510 billion over five years.
Meantime, concern was diminishing about the threat of Mr. Yeltsin'simpeachment, traders said. "I don't think the situation's resolved; I just think people feel less nervous about it," said Mr. Van Brunt.
Early yesterday, Russian Parliament speaker Ruslan Khasbulatov, President Yeltsin's chief opponent, said he opposed efforts by some hard-liners to impeach Mr. Yeltsin. Mr. Khasbulatov said he preferred early, simultaneous elections for president and the parliament, indicating Mr. Yeltsin's opponents the Congress of People's Deputies lack the votes to remove the president at its emergency session set for today, the Associated Press said.
The Clinton administration has said Mr. Yeltsin represents the best chance to push through political reform in Russia.
Advancing common stocks topped decliners by 9-to-6 on the New York Stock Exchange. About 252 million shares changed hands on the Big Board.
General retail stores, drugs, health care, and beverages gained the most in the S&P; 500.
Westinghouse Electric Corp., ACE Ltd., Life Partners Group Inc., Philip Morris Cos., and Merck & Co. were the most actively traded stocks.
Westinghouse climbed $1.125, to $15.50. The company and Mitsubishi Heavy Industries received a $100 million joint contract to install three combustion turbine generators for San Diego Gas and Electric Co.
Philip Morris, which closed down $1.125, at $61.50, sank to a new 52-week low of $60.625 after Morgan Stanley reduced its expectations for earnings growth.
Merck rose 75 cents, to $35.50. The stock is rebounding from Wednesday, when it tumbled to a two-year low on the drug maker's projection for slower-than-expected earnings growth.