Aid For The Anxious

Two landmark decisions in Washington Friday may go a long way toward calming investor anxiety that sent stock markets on a wild swing to close the week, reports CBS News Business Correspondent Anthony Mason.

The decision by President Clinton to a limited release of oil from the nation's Strategic Petroleum Reserve—the first time it has ever been done in peacetime—could assuage fears that rising fuel costs would cut into corporate profits.

And the Federal Reserve's unprecedented announcement that it was moving to shore up the European currency, the euro, was welcome news to American exporters being squeezed by the strong dollar.

Worries about low earnings and the weak euro sunk both the Dow Jones and the Nasdaq Friday before both indexes rallied.

In recent days, blue chips like Goodyear, DuPont and Gillette all blamed higher oil prices for disappointing earnings and watched their stocks slide.

The government's decision will temporarily infuse 30 million barrels of oil from the country's reserves over 30 days to offset a crushing imbalance caused by increased demand.

But other companies—even new-line, high tech firms like Intel—have blamed lower earnings not on gas prices, but on the euro.

The European currency has been falling fast against the dollar, down 18 percent this year. Global companies like McDonalds say they're being hurt because their products are now more expensive overseas, and their euro profits are harder to bring home because the euro loses value before they can exchange it for dollars.

"When you make money someplace, by the time you get it home you'd like it to be there," said Arthur Cashin of Paine Webber. "It's not much fun walking 100 miles with a block of ice that's melting."

The euro sank to a new low of 84.38 cents on Wednesday, its lowest level since its introduction as the common currency of 11 European nations in January 1999.

So the Federal Reserve joined the European Central Bank the Bank of Japan overnight in buying euros to try to prop up the currency. They said they had jointly intervened to help boost the sagging 11-nation currency, reacting to fears that its persistent weakness could hurt the global economy.

"The problem with the euro is the dollar," said Prudential Securities analyst Larry Wachtel. "The dollar is strong because everyone wants to own America. They don't want to own Europe."

Indeed, while the intervention pushed the currency briefly up more than 5 percent, the euro fell off its quick gains and experts said the lasting effects of the unprecedented move remained very much in question.

On Wall Street, the market's focus was on chip-maker Intel.

A bad earnings report by Intel hurt both the Nasdaq, on which it is traded, and the Dow Jones, where it is one of the 30 stocks that makes up the industrial average. The Nasdaq fell to its lowest point since August.

Both later recovered because investors saw the drop in share prices as a buying opportunity, according to MarketWatch.

The Dow Jones industrial average closed up 81.85 points to 10,847.37. The Nasdaq ended the day down 25.11 to 3,803.76, while the Standard and Poor's 500 Index slipped 0.33 to end the session at 1,448.72.

The late-day rally proves that despite lower profits, Wall Street still has faith in the U.S. economy.

"It'll slow us down," said Wachtel of oil prices, "But it isn't sufficient in and of it itself to tip us into any kind of recession."

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