Dow comes roaring back
The blue-chip index brushes off an
Star-Bulletin news services
earnings warning from IBM
and jumps 172 pointsNEW YORK -- Stocks rose sharply today, led by financial shares that soared on the possibility that legislation will soon allow banks, stock brokerages and insurance companies to combine.
The Dow Jones industrial average rose 172.56, or 1.7 percent, to close at 10,470.25, easily erasing yesterday's 94-point decline that was sparked by a steep selloff in IBM. The Dow ended the week with a gain of 450.54 points, or 4.5 percent.
Broader stock indicators also closed higher. The Standard & Poor's 500 rose 18.04, or 1,4 percent, to 1,301.65, and the Nasdaq composite index rose 14.57, or 0.52 percent, to 2,816.83.
Advancers beat decliners by nearly a 2-to-1 margin on the New York Stock Exchange, with 1,954 up, 1,058 down and 505 unchanged. NYSE volume totaled 956.55 million shares vs. 988.59 million yesterday.
The NYSE composite index rose 9.87 to 601.16; the American Stock Exchange composite rose 6.52 to 792.61; and the Russell 2000 index of smaller companies gained 4.42 to 418.69.
The price of the 30-year Treasury bond fell 3/32 point, or 94 cents per $1,000 in face value; its yield falling to 6.34 percent from 6.35 late yesterday. Two-year yields rose 1 basis point to 5.92 percent.
Financial companies drove the stock market higher after Republicans and Democrats settled a dispute on bank lending rules that threatened to derail legislation that would overhaul the financial services laws.
Ultimately, the legislation would dismantle Depression-era laws that restrict banks, brokerage firms and insurance companies from merging. The prospect of new business combinations and a fresh wave of mergers lifted the sector, analysts said.
Among the Dow 30, American Express, J.P. Morgan and Citigroup rose solidly.
But analysts suggested financial-services stocks also were ready for a rebound after being deflated by worries about higher interest rates.
"Many of these stocks had been beaten down and left for dead," said Scott Bleier, chief investment strategist at Prime Charter Ltd. "The market has known about this legislation for a long time, so I don't think it's entirely responsible for the strength of the group."
Yesterday, the Dow closed with a loss of 94.67 after recovering from a 213-point slide.
The decline came after IBM's late-Wednesday warning that customers are postponing purchases of network and database machines, fearful that complex system upgrades will make them more vulnerable to the Year 2000 computer bug. The Dow component stock fell $16 yesterday but today IBM regained $2.871/2 to $93.871/2.
With no major economic reports to steer the market, investors were able to focus on the continuing flood of company reports on the just-ended third-quarter.
"This market has had two major worries: short-term interest rates and earnings," said Arthur Hogan, chief market analyst at Jefferies & Co. "This week, we put interest rates behind us a bit so that we could focus on earnings."
Of the 304 companies in the S&P 500 that have reported third-quarter earnings so far, 61.5 percent have topped analyst expectations, according to First Call/Thomson Financial. That compares with 64.6 percent at this point in the second quarter.
Shares of Gillette Co. slid following a report late yesterday that met most profit forecasts but warned of weak fourth-quarter sales and earnings due to inventory problems.
The stream of corporate earnings reports peaked this week, leading many market watchers to believe investors will once again focus on interest rates next week. Government reports on the gross domestic product and employment costs are expected to provide the latest sense of whether inflation is escalating.
Investors are concerned that the Federal Reserve will raise short-term interest rates at its next meeting Nov. 16.
The Associated Press and Bloomberg News contributed to this report.