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FINANCIAL MARKETS

Stocks Extend Rally for a 4th Day; Bond Yields Jump

November 03, 1998| From Times Staff and Wire Reports

The bulls were running on Wall Street once again on Monday, sending stocks broadly higher amid growing faith that global financial turmoil has run its course.

But the Treasury bond market was hit by selling, sending yields up, as investors turned away from "safe haven" securities.

The Dow Jones industrials rose 114.05 points, or 1.3%, to 8,706.15, the highest since Aug. 18.

In the broad market, winners topped losers by 23 to 8 on the New York Stock Exchange and by 26 to 15 on Nasdaq, in active trading.

Smaller stocks, which have roared back from their lows of early October, led the market again. The Russell 2,000 index of smaller shares surged 2.3% to its highest level since Aug. 25.

Blue-chip stocks had dropped almost 20% from mid-July through Aug. 31, and smaller stocks suffered much deeper losses, as markets worldwide were slammed by fears of global economic calamity.

Those fears had been stoked by Asia's deep crisis, Russia's ruble collapse and concern that Latin America also would succumb.

"It was sheer terror for the past three months," said Philip D. Tasho, investment chief at Riggs Investment Management.

Now, he said, investors realize that "we're not in a recession and there is still no inflation," and that corporate earnings haven't collapsed, although overall third-quarter results are expected to be down slightly from a year ago.

Most important, analysts say, the Federal Reserve Board has cut interest rates twice since Sept. 29--and the market plainly expects more, as the Fed tries to assure that the global economy doesn't fall into recession in 1999.

Given all of that, "it looks like the investor has found the stock market again," said Alan Day, who helps oversee $2.1 billion at Stratevest Group in Burlington, Vt.

Investors also have been encouraged by sharp rebounds in many foreign markets. Singapore's market jumped 4.9% on Monday. The German market gained 1.9%.

Also, Japan's market gained 2.9% on news that Fuji Bank, Dai-Ichi Kangyo Bank and Yasuda Trust & Banking said they may set up a bank to take over Yasuda Trust's pension fund and corporate securities management businesses.

That is another sign that the country's financial system is taking further steps to restore its health, analysts said.

The news also bolstered the yen, which rose to 114.73 per dollar from 116.14 on Friday.

A weaker dollar may have contributed to Treasury bonds' troubles. Yields jumped across the board, in part as money left bonds in favor of stocks.

Also, the Treasury will auction $38 billion in new bonds this week, starting today. That looming supply hurt the market.

The yield on five-year T-notes jumped to 4.40% from 4.22% Friday. The 30-year T-bond ended at 5.25%, up from 5.15% and the highest since Sept. 15.

But for now, the stock market isn't worried about rising bond yields, analysts say.

Among Monday's highlights:

* Coca-Cola helped boost the Dow index, rising $3.44 to $71 after Warren Buffett, the billionaire investor whose Berkshire Hathaway controls about 200 million shares of the beverage company, told the New York Times he expects Coke's business to keep growing even as "hiccups" in other countries cause overseas sales to decline.

* Other Dow gainers included American Express, up $3.81 to $91.88; Boeing, up $3.75 to $41.31; and Merck, up $3.44 to $138.50.

* Many industrial stocks rose on optimism about the economy. GM leaped $2 to $65.19, B.F. Goodrich rose $1.75 to $37.75 and Reliance Steel was up $1 to $31.94.

* The tech sector was driven by smaller names, including Macromedia, up $2.94 to $22.94, ISS Group, up $2.06 to $29.63, and Remedy, up $3 to $11.75.

* Sofamor Danek Group, a surgical equipment maker, soared $8.50 to $110.13 after it agreed to be acquired by Medtronic, one of the world's largest manufacturers of pacemakers, for $3.6 billion, or $115 a share. Medtronic rose $1.56 to $66.56.

*

Market Roundup, C14

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