The U.S. stock market racked up strong gains Wednesday after favorable comments from an influential market strategist sent Japanese shares flying higher.
The Dow Jones Industrial Average advanced 76.21 points, or 0.9 percent, to 8,782.36.Morgan Stanley Dean Witter's Barton Biggs, declaring Japan to be "the next great trade," increased his asset allocation in Japanese stocks to 75 percent of his model portfolio, up from 40 percent.
Japan, given its large contribution to the world's economy, has been a source of concern among investors. In particular, its troubled banking system, burdened by a mountain of bad loans, has hampered the country's ability to recover from the speculative bubble in real estate and other assets that burst earlier in the decade.
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To a much lesser extent, the U.S. congressional elections also boosted U.S. markets. The Democrats did better than expected, reducing any market uncertainty related to the chances of President Clinton being impeached.
In the afternoon session, a computerized sell program kicked in cutting into most of the Dow's earlier rise. But traders weren't concerned with the temporary weakness.
"Today's afternoon weakness was the market taking a breather from all of these straight days of straight upmoves," said Ben Marsh, managing director and head of equities trading at Adams Harkness & Hill Inc. "A lot of people bought for trades and aren't long-term investors. These are the guys causing the market to come in during the early afternoon."
"I have nevr, ever seen a change from a market going from so-bad to so-good in a short period of time as we're seeing right now," said Gary Kaltbaum, technical analyst at JW Genesis Securities Inc.
Shares of small company stocks, which have lead the market over the past three weeks, once again outperformed bigger issues. The Russell 2000 Index of small-company stocks gained 1.1 percent , an eye-popping 28 percent increase from the Oct. 8 market lows vs. a 17 percent gain for the Dow.
In Wednesday's market indictors:
- The Standard & Poor's 500 Index rose 0.7 percent.
- New York Stock Exchange winners hammered losers by 2 to 1.
- On the Big Board floor, turnover increased 23 percent to 860 million shares.
- The Nasdaq Composite advanced 2.0 percent. Advancing issues led decliners by almost 3 to 2 in the Nasdaq Stock Market. Volume totaled 1.03 billion shares.
- The 30-year Treasury declined 1 20/32, to yield 5.321 percent.
Among the stocks in the news:
- Cisco Systems (CSCO) rose ascended 2 3/16 to 65 9/16. After the close of trading Wednesday, it checked in with 34 cents a share of operating profits in its fiscal first quarter. That was a penny more than Wall Street had expected. The computer networker logged a profit of 26 cents a year ago. Sales grew 39 percent.
- Disney (DIS) bested the Wall Street consensus estimate by a penny with its fiscal fourth-quarter operating results of 16 cents a share. The figure undercut the year-ago pro forma number by 26 percent. The results were hampered by softness in its movie distribution and international home video businesses. The stock fell 15/16 to 28 5/8.
- Aetna (AET) posted third-quarter operating net of $1.21 a share vs. most forecasts of 95 cents. Revenues rose 17 percent. The shares were up 9/16 to 79 1/16.
- Maker of telecommunications equipment gear Qualcomm (QCOM) netted 54 cents a share in its fiscal fourth quarter, 29 percent above the year-ago tally. That beat the estimate of most Wall Street analysts by 4 cents. The shares lost 2 5/8 to 55.
- Seagram (VO) said operating earnings in its fiscal first quarter came to 27 cents a share, besting Street projections by 3 cents. A year ago, it earned 32 cents. Revenues slipped 8 percent. Seagram expects a recovery in the next three quarters. The shares tacked on 5/8 to 34. See full story.
- Hutchinson Technology (HTCH) vaulted 5 3/8 to 27 1/4. The computer disk drive manufacturer logged a fiscal fourth-quarter loss of 67 cents a share, 4 cents better than most views. Hutchinson said it had struck an agreement with Applied Kinetics regarding alleged infractions of a noncompetitive pact between the two companies.
- Other disk drives also rose higher in sympathy with Hutchinson. The feeling among investors is that the industry's fundamentals have already seen their worst. Among the Big Three, Seagate Technology added 2 to 29 11/16, Quantum 2 11/16 to 21, and Western Diital 1 5/8 to 14 1/4. And Storage Technology rose 3 11/16 to 35 3/4, Read Rite 1 1/4 to 13 7/16, Komag 1 to 7, and Microchip Technology 3 15/16 to 31.
- Applebee's International (APPB) sagged 1 15/16 to 17 3/4. The restaurant franchisor and operator met Wall Street's third-quarter earnings estimates of 45 cents a share. It earned 39 cents in the same period a year ago. Revenues grew 26 percent. But the company, citing a shortfall in franchise sales and its Rio Bravo Cantina theme restaurants, guided the Street to lower its earnings estimates for 1998.
- Investors fled shares of Corporate Express (CEXP). Stock of the office products supplier cratered 3 27/32, or 35 percent, to 7 56/256 after warning analysts it will not meet most third-quarter earnings predictions of 16 cents a share. Instead, it sees 9 cents as the likely tally. Weak British sales were the culprit behind the grim news.