Closing Market Report

Star-Bulletin news services

Friday, January 15, 1999

Dow soars 219
on Brazil’s real deal

The move to float the currency
lifts Sao Paulo's stocks up 33% and
boosts the Nasdaq 71 points

NEW YORK -- Stocks surged today, bouncing back from four days of losses as investors cheered Brazil's plan to stop spending heavily to prop up its battered currency.

The Dow Jones industrial average climbed 219.62, or 2.4 percent, to close at 9,340.55. The index of 30 blue-chip stocks still ended the week down 3.1 percent but moved back into positive territory for the year after losing 353 points on Wednesday and yesterday.

Broad-market indexes also rose today.

Recent economic troubles in Brazil have raised fears among investors that profits of U.S. companies operating in Latin America could suffer.

Wall Street was pleased with Brazil's decision to stop defending its battered currency, the real. The move to let the real float in currency trading is seen as a way for Brazil to attract foreign investment and hold on to its currency reserves.

The Brazilian currency fell about 8 percent against the U.S. dollar, but the main stock market in Sao Paulo -- Latin America's largest exchange -- soared about percent today, after plunging the last six sessions.

Brazil is the biggest and most important economy in Latin America, which accounts for 20 percent of U.S. exports. Investors worry that its problems will spread throughout the region, specifically to Mexico.

Mexico's stock market, meanwhile, was up 7.78 percent today.

"I do think there's recognition that it isn't quite as bad as Asia, that it doesn't necessarily have to reverberate around the globe," said Peter Anderson, chief investment strategist at American Express Financial Advisors.

"We survived Asia very well, because the Federal Reserve reduced interest rates, and in fact that's what pulled the market up in the final quarter of last year," he said. "I think people increasingly recognize that these kinds of dilemmas, as long as they don't spread, can actually be constructive."

The gains in U.S. trading helped lift European stocks from midday losses. Germany's DAX index closed up 1.4 percent, Britain's FTSE 100 rose about 2.1 percent, and France's CAC-40 gained 1.4 percent.

In overnight trading, Asian stock markets were mostly higher. Blue chips tumbled by 1.9 percent from the outset in Hong Kong, Asia's second-largest market after Tokyo, but finished with a loss of just 0.4 percent. Singapore shares rose 1.6 percent, while Taiwan's main index gained 3.4 percent.

"People in this region seem not too worried about Brazil now," said Percy Au-Young, sales director at DBS Securities (Hong Kong) Ltd.

The Tokyo Stock Exchange was closed today for a holiday.

On Wall Street today, advancers beat decliners by a nearly 3-to-1 margin on the New York Stock Exchange, with 2,183 up, 875 down and 497 unchanged. NYSE volume totaled 796.3 million shares vs. 793.6 million yesterday.

The Standard & Poor's 500 rose 31.07, or 2.56 percent, to 1,243.26. The Nasdaq composite index gained 71.38, 3.14 percent, to 2,348.20. The NYSE composite index rose 12.32 to 593.39; the American Stock Exchange composite index climbed 11.13 to 709.29; and the Russell 2000 index of smaller companies rose 6.95 to 427.05.

The price of the Treasury's main 30-year bond fell 25/32 point, or $7.81 per $1,000 in face value, while its yield climbed to 5.11 percent from 5.05 percent late yesterday. Prices and yields move in opposite directions.

U.S. financial markets will be closed Monday for Martin Luther King Day.

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