>>Friday October 16, 5:09 pm Eastern Time
Dow ends with biggest weekly point gain in history
By Huw Jones
NEW YORK, Oct 16 (Reuters) - The Dow rallied Friday to post its biggest weekly point gain in history after a surprise interest rate cut by the Federal Reserve on Thursday to cushion the U.S. economy from global uncertainties.
Battered sentiment was also buoyed by expectations of further rate cuts here and abroad and hopes that third quarter earnings may not turn out as bad as feared.
The Dow Jones Industrial Average ended unofficially up 117.40 points at 8,416.76, its best close since Aug 26.
It was up 517.24 points, or 6.5 percent for the week.
Sentiment also improved over the week because Japan finally agreed to provide cash to shore up shaky banks and Congress passing a budget that included $18 billion for the International Monetary Fund to help teetering economies like Brazil.
But the Fed's move stole the spotlight around the world.
''While this cut does little to help the immediate picture of third and fourth quarter earnings weakness, it can have the desired effect of preventing the U.S. economy from a recession in 1999,'' said Barry Hyman, senior market analyst at Ehrenkrantz King
On the New York Stock Exchange, advancing issues led declines by two-to-one, with volume the fourth heaviest ever at 1.02 billion shares.
The so-called double-witch, or expiry of stock index options, generated some of the heavy trading.
The Nasdaq closed up 9.94 points at 1620.95. The tech-laden index gained 128.46 points, or 8.6 percent for the week.
Analysts said the worst may be over for stocks near-term.
''Sentiment is depressed but is starting to recover. I don't think the market is going to run away on the upside,'' said Marshall Acuff, portfolio strategist at Salomon Smith Barney.
Evidence of steadier nerves was seen in the broadness of the market advance, with recently battered transports and small caps, along with the cyclicals joining in, while the defensive stocks such as utilities, fell.
The Standard & Poor's 500 stock index rose 8.93 points to end at 1056.42.
The Russell 2000 small cap benchmark outpaced all the major stock indexes, closing up 8.07 points, or 2.41 percent, at 342.88.
The Dow Jones Transpiration Average closed up 116.59 points, or 4.38 percent, at 2780.87.
Wall Street was encouraged by the positive response from stock markets Friday in Asia and Europe to the Fed's 25 basis point cut in key short-term rates.
Still, overseas markets closed off their highs as some analysts wondered if there was a worrisome, yet-to-be-revealed reason why the Fed took the rare step of cutting rates in between meetings of its policy committee.
The Dow blasted through upside resistance of 8150 and some feel a period of consolidation now lies ahead, with little chance of regaining July's record high of 9337.97 soon.
''It's vulnerable to profit-taking,'' Hyman said.
Cheered by a rate cut, the leadership financials did well again, with Citigroup (NYSE:CCI - news) up two at 41-13/16.
But shares in BMC Software Inc. (Nasdaq:BMCS - news) slid 6-3/4 to 42-1/8 after two Wall Street firms cut their ratings on the stock due to worries about a drop in its deferred revenues.
Kellogg Co. (NYSE:K - news), the nation's largest cereal maker, said it expected 1998 earnings per share to fall 20 percent from 1997 because of global economic turmoil and sluggish sales in the United States and Britain. The stock closed off 3-9/16 at 34-1/16.
Cyclicals such as blue chip Alcoa (NYSE:AA - news) gained despite the Federal Reserve, a day after it cut rates, reported that U.S. industrial output dropped unexpectedly by 0.3 percent in September, wrapping up the most sluggish quarter in 7-1/2 years.
Inflation, meanwhile remains tame with the Consumer Price Index in September unchanged after a 0.2 percent gain in August.
Alcoa rose 2-1/8 to 79-1/4. Another cyclical, Good Year Tire & Rubber Co. (NYSE:GT - news) gained 2-5/8 to 53. United Technologies Corp. (NYSE:UTX - news) advanced 3-1/4 to 83-1/2.<< |
