Dow Flexes Muscles Following Rise In Asian Market Gain Of 232 Points Raises Hopes That Global Market Sell-Off Has Bottomed Out

Seeming to put last week’s wild and scary ride behind it, the Dow Jones industrial average soared Monday in its third biggest point gain ever, reflecting a recovery in Asian markets and an optimism about the American economy.

The Dow jumped 232.31 points to finish at 7,674.39. The rebound came just a week after the Dow plummeted a record 554 points, rattled by a panicky selloff in Hong Kong and elsewhere in Asia, Europe and Latin America. The buying spree put the Dow within 41 points of recouping the losses of a week earlier.

Some 1.3 billion shares traded hands on all U.S. stock markets Monday, settling down to a more typical level after the frantic pace of nearly 3 billion shares last Tuesday.

“We’ve recovered from the psychological shocks of last week,” said David Hale, global economist at ZurichKemper Group in Chicago.

Cynthia Latta, principal U.S. economist at Standard & Poor’s DRI in Lexington, Mass., said that investors were “focusing on the positives in the United States instead of on the negatives abroad.”

Helping ease fears of a global financial crisis was a sharp 6 percent gain Monday on the key Hong Kong stock market and recoveries in other Asian and European markets as well. Asian markets were bolstered by a $33 billion rescue package hurriedly put together late last week for Indonesia. It was the second largest ever fashioned by the International Monetary Fund. The biggest, $50 billion, went to Mexico in 1995.

The financial turmoil “is over mostly because the Asian situation seems to be stabilizing,” said Edward Yardeni, chief economist at Deutsche Morgan Grenfell in New York.

After its 554-point plunge last Monday, the market clawed its way back through the week to regain half that loss. Still, despite the losses, the Dow has gained 19 percent so far this year. While that gain is more than analysts had predicted at the end of last year, it is below the 28 percent at the time of its record high on Aug. 6.

The Dow’s largest point gain, at 337.17, was posted last Tuesday, beating the 257.36-point rise on Sept. 2.

“The rally in Hong Kong as well as the European markets clearly gave the opening a big boost and at least placed the notion with investors that the worst is behind us,” said Ned Riley, chief investment officer at the Bank of Boston. “The markets have now stabilized and are settling down to another run for the records.”

A series of economic reports also gave investors more bright news about the seemingly invincible U.S. economy.

Growth in American’s personal incomes and spending moderated and construction spending fell sharply in September in a soft landing to a robust quarter.

Meanwhile, a private survey by a group of purchasing managers suggested that manufacturing activity was more hearty than expected last month, signaling a strong start to the final quarter of the year.

The National Association of Purchasing Management’s index advanced to 56 percent in October, a faster clip than analysts had expected.

While such a strong report in the past might have sent the markets tumbling by raising fears of inflationary pressures, it seemed to have the opposite effect this time.

“The strong NAPM report suggests the U.S. economy is doing very well,” said Latta. “It reminded everybody that the economy is in very good shape,” said Yardeni.

And that, in other times, might have raised market worries that Federal Reserve policymakers, scheduled to meet later this month, would act to raise interest rates in an effort to cool the economy. But Fed Chairman Alan Greenspan, speaking last week during the market gyrations, seemed to indicate such a move wasn’t in the offing.

On the London Stock Exchange, the benchmark Financial Times-Stock Exchange 100-share index rose 1.3 percent. Frankfurt’s DAX index gained 3.4 percent and the CAC 40 index in Paris was up nearly 1.8 percent.

The Hong Kong stock market, which triggered the global market panic amid a speculative attack on its currency, gained 631.33 points or 5.94 percent to end Monday at 11,255.11.

China-backed shares and blue-chip conglomerate stocks were the biggest gainers.

The Tokyo Stock Exchange and other financial markets in Japan were closed for a national holiday.

After a slow start, South Korea’s market advanced 2.9 percent. Dealers said foreign investors resumed buying, taking advantage of the newly raised ceiling on how much stock they can own in a listed company. The limit became 26 percent on Monday, up from 23 percent.

Some of the stocks that moved substantially or traded heavily Monday:

NYSE

Mossimo Inc., down 1-1/8 at 6.

The Irvine, Calif.-based sportswear designer said it expects a third quarter loss, the Dow Jones News Service reported. The quarterly forecast would fall significantly below analysts’ earlier expectations.

Fluor Corp., down 5-1/8 at 36.

The Irvine, Calif., engineering and construction company said fiscal 1998 earnings would fall below analysts’ expectations. The company cited lower profits at its Fluor Daniel unit.

Sears Roebuck, up 3-7/16 at 45-5/16.

Bear Stearns & Co. upgraded its rating of the retailer. The securities firm said it expects Sears stock to rise after the company releases more information on its plan to fix problems in its credit business.

NASDAQ

Oregon Metallurgical, up 10-7/16 at 33-7/8.

Allegheny Teledyne agreed to buy Oregon in a stock swap, valued at $560 million, the Dow Jones News Service reported.

Dell Computer, up 3-1/98 at 83-1/4.

Moody’s Investors Service gave the Round Rock, Texas-based computer maker a positive credit rating and said the company’s outlook was favorable. Dell also said it is now taking orders for its new Latitude CP notebook personal computers.

PeopleSoft, up 4-5/8 at 67-1/2.

Deutsche Morgan Grenfell Inc. said it has added PeopleSoft to a list of stocks it will focus on, the Dow Jones News Service reported. The stock replaces blue-chip semiconductor maker Intel on the list.