U.S. Markets Snap Losing Streak

Wall Street bounced back Friday from a global selloff that knocked nearly 6 percent off the Dow industrials over the previous three days.

The Dow Jones industrial average closed up 152.16, or 2 percent, at 7,784.69, in a day marked by wide swings. The Dow was off more than 100 points in morning trading.

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On the week, the Dow fell 244.08 points, or 3.0 percent, after three winning weeks in a row.

On the year, the Dow is off 123.56 points, or 1.6 percent, following gains of 33 percent, 26 percent, and 22 percent, in 1995, 1996, and 1997, respectively.

"Stocks are still not reacting well to bad news," said Peter Green, technical strategist at Gruntal & Co. "In the very near-term, it looks like the Dow's Sept. 1 low of 7,400.30 will hold, but I think the upside is limited."

Morning comments by President Clinton encouraged traders Friday.

The president, speaking to reporters, said the U.S. should seize the initiative in restoring order to the global economy. He said he has ordered the U.S. Export-Import Bank to offer short-term credit to bolster U.S. commerce in Latin America.

"We don't have to have a worldwide recession," Clinton said.

"There's a rumor that's making the rounds that the U.S. will, with the participation of others, come up with some type of credit facility for the emerging markets," said Joseph LaVorgna, vice president and financial market economist at Deutsche Bank.

Clinton's words only added fuel to the speculation.

Later Friday, U.S. Treasury Secretary Robert Rubin said the thrust of Saturday's conference of finance ministers and central bankers from the Group of Seven industrialized nations will be "largely on Japan" and added that the U.S. stance on the dollar is unchanged.

But Rubin stopped short of providing details or even the existence of a wide-ranging plan to shore up emerging-market economies.

On Monday, the International Monetary Fund and World Bank will also hold meetings.

Volume was very heavy, a market positive.

Last week's rescue of hedge fund Long-Term Capital anagement from the edge of collapse by a group of financial concerns has kept investors worried about the extent of other funds' trading losses on banks and brokerages.

Some participants wondered whether banks' exposure to hedge funds might result in a credit crunch similar to that of the early 90's.

On Friday, another major hedge fund, Omega Advisors, stepped forward to quell speculation that it was on the brink of shutting down. "Nothing could be further from the truth," Chairman Leon Cooperman said in a statement.

Meanwhile, on the economic front, the government reported that 69,000 new nonfarm jobs were added to the nation's payrolls in September, the weakest showing since January 1996.

In addition, the unemployment rate edged up to 4.6 percent from August's 4.5 percent.

The data reinforced the markets' perception that U.S. economic growth is ebbing, and strengthened the notion that the Federal Reserve will have to lower short-term interest rates further in the months ahead.

Technology sector idled after two days of fierce liquidation, but Internet-related shares snapped back from their two-day drubbing as volume escalated. The hard-hit financial sector also bulled higher, led by the bank group, which had lost about 30 percent from its July high.

Retailers and oil industry shares also traded higher.

In Friday's market indicators:

  • The Standard & Poor's 500 Index rose 1.6 percent.
  • New York Stock Exchange winners topped losers by 17 to 13.
  • On the Big Board floor, turnover rose 1 percent to 903 million shares.
  • The Nasdaq Composite gained 0.2 percent. Declining issues led advancers by 21 to 19 in the Nasdaq Stock Market. Volume totaled 860 million shares.
  • The Russell 2000 Index of small-company stocks sank 0.1 percent.
  • In the bond market, the 30-year Treasury rose 19/32, to yield 4.843 percent.

Among the stocks in the news Friday:
  • Merrill Lynch (MER) tacked on 2 to 46. After markets closed Thursday's, the brokerage said its exposure to hedge funds totaled $2.083 billion. Of that amount, $1.999 billion is being held as collateral against the exposure, predominantly cash, U.S. Treasurys, and U.S. agency securities. Merrill said its exposure to Long-Term Capital Management was $1.4 billion.
  • Dow Jones (DJ) advanced a point to 44 11/16. The media concern said it will probably record third-quarter results below the consensus estimate of Wall Street analysts. Dow attributed its revised forecast to lower-than-anticipated advertising linage.
  • Scientific-Atlanta (SFA) cratered 7 11/16, or 38 percent, to 12 11/16. The telecommunications equipment provider sees fiscal first-quarter net coming in more than 70 percent below Street projections due to slowness in foreign markets.
  • Revlon (REV) lost 12 3/8 points, or 45 percent, to 15 7/16. The cosmetics interest warned that third-quarter operating profits will be about 22 cents a share, far les than the 73 cents expected by most analysts. Revlon cited ebbing growth in its mass market cosmetics business, above-forecast loss of market share, delays in new product releases, slowing emerging-market demand, and unfavorable currency movements.
  • Staples (SPLS) rose 1 to 27 1/16. The purveyor of office products will be added to the Standard & Poor's 500 Index Oct. 6, replacing General Signal (GSX). Money managers whose portfolios mirror the composition of the S&P 500 bought Staples shares.
  • Another change to the S&P 500 sent Coca-Cola Enterprises (CCE) 1 15/16 higher to 24 13/16. The stock will be added to the index at the close of trading on Oct. 7.
  • General Electric (GE) sank 3/16 to 75 3/8. Responding to a New York Times report, the company said it will not split up its GE Capital Services division. It also said it should report record third-quarter earnings and operating margins next week.
  • PeopleSoft (PSFT) staggered to an 8 5/16-point loss to 24 3/16. Goldman Sachs and Morgan Stanley Dean Witter slashed their ratings of the software developer due to competitive pricing pressures and fears of falling license revenues.
  • Orion Capital (OC) gave up 5/16 to 35. The insurer cautioned the Street that it will be 39 cents to 45 cents a share short of most estimates due to shrinkage in the carrying value of its investments. Most analysts had counted on 81 cents.
  • McDonald's (MCD) suffered a 1 13/16-point setback to 58 1/16. Morgan Stanley Dean Witter analyst Howard Penney lowered the fast-food giant's stock to "outperform" from "strong buy," cut his 12-month price target to $70 from $85, and slimmed earnings estimates for 1998 and 1999.
  • Benchmark computer-related traded mixed with a lower bias. On the downside, International Business Machines sank 9/16 to 124 13/16, Cisco Systems 1 1/2 to 55 3/4, Lucent Technologies 2 7/8 to 63 1/4, and Sun Microsystems 1 15/16 to 43 5/8. But Dell Computer was ahead 1 1/8 to 62 11/16 and Intel climbed 7/16 to 83 7/8.
  • A bunch of big retailers put up point-plus advances. Wal-Mart Stores was ahead 2 5/16 to 55 7/16, TJX Cos. 2 3/4 to 18 1/2, Dayton Hudson 1 7/16 to 35 5/8, May Department Stores 2 15/16 to 53 3/16, Nordstrom 1 13/16 to 25 3/4, and Dillards 1 1/4 to 28 7/16.