The U.S. stock market snapped a four-day losing streak and soared yesterday after Brazilian officials decided not to defend their troubled currency, raising hopes that the South American colossus will break out of its economic funk.
The move sent the Dow Jones industrial average up 219.62 points, or 2.41 percent, to close at 9,340.55, ending a four-day drought that had taken the 30-stock index down nearly 6 percent.
"The resiliency of this market continues to be the story," said Richard Cripps, chief market strategist at Legg Mason Inc., a Baltimore brokerage and money management firm. "We were a little bit surprised here with the magnitude of things."
But the Dow's gain paled in comparison to Brazil's Bovespa stock index, which rocketed 1,689.6 points, or more than 33 percent. That's equivalent to the Dow gaining 3,000 points in a day, said Alfred Goldman, chief market strategist at St. Louis-based A. G. Edwards & Sons Inc.
"Wall Street realized they had overreacted to Brazilian fear," he said.
Brazil's economy has been struggling for months and investors have pulled billions of dollars out of the country looking to put their money elsewhere. Brazil rattled Wall Street Wednesday when officials devalued the real, and Gustavo Franco, its central banker, resigned. On Thursday, the Dow sank 228.63 points.
"The market clearly doesn't want Brazil to run out of reserves defending its currency," Cripps said.
Brazil is a key market for U.S. multinational companies, and it represents the 11th-largest market for their exports. It is viewed as the linchpin of Latin America, so it must remain strong for the region to prosper.
The Standard & Poor's 500 stock index, a broad measure of the stock market, jumped 31.07 points, or 2.56 percent, to 1,243.26. The Nasdaq composite index soared 71.38 points, or 3.14 percent, to 2,348.20.
The Nasdaq's gain was powered by a number of high-tech companies, including Market-Watch.com Inc., which made its debut as a publicly held firm. Its shares shot up $80.50 to close at $97.50 after an initial public offering price of $17 a share.
Other technology gainers included Microsoft Corp., the world's biggest software maker, up $5, to $146.75; Cisco Systems Inc., up $4.3125, to $100.6875; and Intel Corp., the No. 1 computer-chip maker, up $1.9375, to $135.6875.
The Russell 2,000 index of small-cap stocks jumped 6.95, to 427.05; the Wilshire 5,000 index rocketed 262.83, to 11,450.66; the American Stock Exchange composite index advanced 11.13, to 709.29; and the S&P; 400 midcap index added 5.98, to 383.91.
The Sun-Bloomberg Maryland index of the top 100 Maryland stocks climbed 3.95, to 195.59.
Advancing shares outnumbered decliners on the New York Stock Exchange by an 11-to-4 ratio. Almost 798 million shares changed hands on the Big Board, up from the three-month daily average of 721 million.
For the week, the Dow average fell 3.1 percent, its worst performance in seven weeks. The S&P; 500 lost 2.5 percent and the Nasdaq composite gained 0.2 percent.
Many analysts are optimistic that the stock market will keep rising because the same elements that have powered it over the years remain in place: low inflation, low interest rates, and strong consumer spending.
"I am at the point where another good year may be in the cards," said David Straus, senior portfolio manager at Washington-based J. L. Capital Management Inc., which manages $35 million in assets. "The undelying economic trends just aren't changing. It is hard for the equity market to do poorly in that kind of environment."
Goldman said the downturn in the stock market that began early this week is over. He expects the Dow to reach a high of 10,500 this year.
"We are in a bull market, and the popular averages are going higher," he said.
U.S. financial companies, which have $65 billion in loans at stake in Latin America, rallied. American Express, which had lost 6.2 percent Wednesday and Thursday, rose $8.375, to $104.375. J. P. Morgan & Co., which lost 9 percent on those two days, jumped $7, to $109. Citigroup Inc., which lost 11 percent, rose $1.125, to $52.
Mellon Bank Corp. rose $5.25, to $70.375, after the U.S. bank with the biggest mutual fund business said fourth-quarter earnings rose 16 percent as it took in more fees. Mellon made 84 cents a share from operations, beating analysts' average estimate by a penny.
Xerox Corp., which analysts had expected to get between 8 percent and 9 percent of its 1998 sales from Brazil, jumped $5.375, to $116.375, after tumbling 5.7 percent Wednesday and Thursday.
Coca-Cola Co., the world's biggest soft-drink maker, rose $1.3125, to $64.8125. Brazil is Coke's sixth-largest market.
Ford Motor Co., which accounts for 14 percent of the Brazilian car and truck market, gained $1.625, to $62.
Reader's Digest Association Inc. climbed $2.5625, to $28.625. Time Warner Inc. is in talks to combine Reader's Digest, the world's largest-circulation magazine, with some Time Inc. publications and direct-marketing businesses, people familiar with the talks said. Time Warner added $2.25, to $61.
McGraw-Hill Cos. gained $6, to $108, after the New York Post reported that advertising revenue at all U.S. consumer magazines rose 7.8 percent last year to a record $13.8 billion. McGraw-Hill's Business Week ranked third in ad pages sold.
IDT Corp. fell $3.4688, to $9.9063, after the phone company said earnings in the current quarter through December will fall short of analysts' expectations because of a delay in deploying a network. IDT expected fiscal second-quarter earnings to fall 10 cents short of consensus estimates.
Warner-Lambert Co. fell $1.3125, to $69.8125, as the drug maker said its Rezulin diabetes pill will be the subject of a safety review at a March 26 advisory committee meeting for the U.S. Food and Drug Administration.
Wire services contributed to this article
Pub Date: 1/16/99