Japanese Interest Rate Cut Fuels Stock Rally

Stocks rose on Friday, after Japan cut a key interest rate and investors became optimistic about a similar cut in the United States.

The Dow Jones industrial average rose 31.00 to 4,700.72, reversing a 14-point loss on Thursday and rising for the third out of four sessions this week and closing above 4,700 for the first time since Aug. 3.

“The market is extremely healthy,” said Steven Kroll, managing director at Monness Crespi & Hardt.

Advancing issues led decliners by about 7 to 4 on the New York Stock Exchange, where volume was moderate at 317.26 million shares as of 4 p.m., down from 321.7 million on Thursday.

The big news of the morning was Japan’s action cutting in half its discount rate to 0.5 percent from 1 percent.

The news sent the dollar surging to its highest levels against the yen since January in early trading. The dollar traded late in the day at 99.70 yen, up 0.72 yen, but the dollar fell against other major currencies.

Japan’s easing also lifted U.S. bond prices in the early going. But bonds cut their gains on concerns that the August consumer price index, due out next Wednesday, might show some increase in inflation.

The benchmark 30-year Treasury bond was up 5/16 point after rising nearly 1 point early in the session. Its yield dropped to 6.58 percent from 6.60 percent Thursday.

In general, however, investors were optimistic about an interest rate cut following comments this week by several Federal Reserve officials.

Some of the stocks that moved substantially Friday:

NYSE

First Interstate rose 3-3/4 to 100-1/8.

Wells Fargo rose 1-5/8 to 186-7/8.

Citicorp rose 1/2 to 66-3/4.

First Chicago rose 5/8 to 64-3/4.

BankAmerica rose 1-1/8 to 58-3/8.

Nationsbank rose 1-1/8 to 63-1/2.

The Sept. 18 issue of Business Week says banking analyst George Salem believes First Interstate of Los Angeles will be acquired by San Francisco’s Wells Fargo for about $120 per share. The story came amid a string of banking mergers and acquisitions that continued to lift bank stocks.

IBM fell 1/2 to 98-7/8.

SoundView Financial lowered its earnings estimate for the computer giant to $2.55 a share from $2.66, compared with $1.18 a year ago, citing a potential negative effect of currency-exchange rates and the delay in shipping an upgraded high-end mainframe storage system.

McDonnell Douglas fell 7/8 to 83-1/2.

The stock rose 2-1/4 on Thursday on reports that ValuJet may order 50 of the aircraft maker’s new MD-95 jets, but the company said it wants more orders before launching production. On Tuesday, the stock rose on a report of possible new orders from the Air Force of the company’s C-17 military transport.

NASDAQ

Novell rose 1/8 20-3/4.

Intel rose 5/8 to 65-5/8.

Sybase rose 1-9/16 to 34-1/2.

Dell Computer rose 2-1/8 to 85-1/8.

Computer stocks rallied after putting in a mixed morning.

Cobra Golf rose 4-3/8 to 36-7/8.

The company is rumored to be a takeover target of American Brands, USA Today reports.