Stocks Extend Year-End Rally; Dow Gains 123

U.S. stocks’ year-end rally gained steam Tuesday, as markets worldwide seemed to shake off the Asian blues.

The Dow Jones industrials jumped 123.56 points, or 1.6%, to 7,915.97, adding to Monday’s 113-point advance.

The broad market also was strong, as winners topped losers 2,211 to 798 on the New York Stock Exchange and 2,647 to 1,737 on Nasdaq in moderate trading.

The Standard & Poor’s 500 index surged 1.8% to 970.84, close to its record high of 983.79 reached Dec. 5. The Nasdaq composite rose 1.8% as well, although it remains well below its all-time high of 1,745.85.

Bulls traditionally rule on Wall Street in the final sessions of a year as investors anticipate a further rally in January fueled by fresh flows of cash into mutual funds and retirement accounts. Also, year-end tax-related selling abates after Christmas, because any transactions made in these final days will settle in the new tax year.

Perhaps more important as this year winds down, the market’s bulls seem to be taking heart from a relative calm in troubled Asia in recent days. News that leading global banks had agreed to help South Korea resolve its financial crisis helped set the stage for this week’s rallies, analysts said.

Still, “there’s really been nothing of earth-shattering importance to send the Dow up 250 points in two days. It’s seasonal factors and market dynamics,� argues Scott Bleier, chief investment strategist at Prime Charter.

Other analysts say the market may have been responding in part to news that U.S. consumer confidence is at a 30-year high, despite Asia’s woes.

Rising confidence “is a bullish sign,� said Rex Wardlaw, a money manager with Wells Capital Management in Portland, Ore., which oversees $38 billion. “Maybe the U.S. economy isn’t being slowed by Asia as much as people thought.�

The bond market saw a modest sell-off in the wake of the confidence data. The 30-year Treasury bond yield edged up to 5.96% from 5.92% on Monday.

Barring a steep decline today, 1997 should be the third straight year of 20%-or-greater gains for U.S. blue-chip stock indexes--an unprecedented achievement.

The Dow is up 22.8% year-to-date; the S&P; 500 is up 31.1%.

Even small-stock indexes are showing hefty gains. The Russell 2,000 index of smaller shares is up 19.7% year-to-date.

On Tuesday, markets in Europe and Latin America also extended their 1997 rallies. Germany’s main stock index rose 1.3% and is up 47% for the year in native-currency terms. France’s key index rose 1.2% and is up 28% year-to-date.

The main Mexican share index jumped 1.7% and is up 55% for the year.

Even in battered Asia, many stock markets rose Tuesday. South Korea’s market is closed for the New Year’s holidays until Jan. 3, but Hong Kong’s main stock index gained 2.4% and Malaysia’s key index jumped 3.6%.

The Tokyo market, on its last trading day of the year, rose 3.3%.

Among U.S. market highlights:

* The Dow was led by Disney, up $2 to a record $99; United Technologies, up $2.81 to $72.25; and Caterpillar, up $1.44 to $48.56.

As investors again returned to the big-name shares that have dominated the bull market advance since 1994, other blue-chip winners included Gillette, up $2.06 to $101, nearing its record high of $106.38, and Colgate-Palmolive, up $2.44 to $72.88.

* Retail shares gained on a surprisingly bullish holiday sales report from Dayton Hudson, which jumped $6.38 to $68.38. Other winners included Mercantile Stores, up $2.44 to $61.63; J.C. Penney, up $3.13 to $60.50; and Guitar Center, up $3.22 to $22.75.

* Major drug stocks attracted buyers. Merck rose $1.94 to $106.69, Warner Lambert gained $2 to $127.13 and Bristol Myers surged $2.63 to $95.19.

* Airlines also saw heavy investor demand. AMR, parent of American Airlines, surged $5.06 to $125.69; Delta rocketed $4.88 to $115.75.

* Among smaller stocks, Biogen rose $1.38 to $36.50, Furon jumped $1.56 to $20.25 and retailer Smart & Final gained $1.19 to $18.19.

* Quarterdeck rose 22 cents to $1.47, an 18% gain, on news that three senior officers and two directors recently bought shares of the money-losing software company in the open market.

Market Roundup, D9