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Bulls roar on Wall Street
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February 2, 1998: 5:30 p.m. ET
Blue chips surge, S&P 500 hits record amid merger fever and rallies in Asia
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NEW YORK (CNNfn) - Monday turned into Wall Street's best day yet in 1998 as bullish investors rushed to buy stocks, lifting the S&P 500 index to a new record and giving the Dow industrials their fourth-largest point gain ever.
Bulls in New York joined Asian markets, which celebrated the Lunar new year with double-digit percentage gains. News of a merger deal in the works that could create the world's largest pharmaceutical company also added fuel to the rally.
The good news sent the Dow Jones industrial average surging 201.28 points to 8,107.78. The blue-chip index gained 2.55 percent and closed above the 8,000 mark for the first time since Dec. 9, when it finished at 8,049.66. Monday's gain was also the fourth-largest for the Dow in terms of points.
On the New York Stock Exchange, advances trounced decliners, 2,053 to 952, as 732 million shares changed hands.
But the S&P 500 won the day, rising 20.99, or 2.14 percent, to a record 1,001.27, and closing above 1,000 for the first time in its history.
The Nasdaq Composite gained 33.53, or 2.07 percent, to 1,652.89. (Look here for the performance of widely held stocks.)
But analysts were unsure if the rally would last.
"I think we could rally for the next 30 days, but again, I think you probably want to be more cautious as you get into the spring when the IMF austerity programs in Asia start to really pull the economies down," said Thomas Galvin, chief equity strategist at Deutsche Morgan Grenfell. "So even though we have some current relief rally happening, I think it could be short-lived and not as sustained as we might want."
Bonds and the dollar fell as the rally in Asian stock markets drained funds from the debt market and pressured the dollar against the yen.
Merger frenzy drives stock prices up
News of mammoth mergers in the works helped lift stock prices in Europe and later on Wall Street, aided further by an overnight surge in Asian markets.
Drug stocks led the rally after SmithKline Beecham (SBH) late Friday abandoned its merger talks with American Home Products (AHP) in favor of negotiations with Glaxo Wellcome (GLX).
If the two British pharmaceutical giants agree to join forces, the deal -- valued at over $70 billion - would be the largest in history, creating the world's biggest drug maker and the fourth-largest company in terms of market capitalization.
"It looks like it's pretty much done," said Hambrecht & Quist analyst Alex Zisson, who believed the proposed merger was unlikely to face major regulatory hurdles. (326K WAV) or (326K AIFF)
American depositary receipts of Glaxo soared 8-15/16, or more than 16 percent, to 62-3/4 while SmithKline's ADRs rose 4-3/8, or almost 7 percent, to 67-1/2. But the stock of American Home Products tumbled 3-13/16 to 91-5/8.
Other drug company shares powered ahead amid speculation the SmithKline/Glaxo deal could spark massive consolidation in the industry. Warner-Lambert (WLA) rose 5-7/16 to 155-15/16, Pfizer (PFE) closed up 7/8 to 82-5/8 and Dow component Merck (MRK) gained 3/8 to 117-3/4. ADRs of Zeneca Group (ZEN) soared 8-3/16 to 127-1/4.
Elsewhere, shares of Aetna (AET) rose 3-3/16 to 76-11/16 after a Wall Street Journal report that the company was studying the sale of a large individual life insurance business that could fetch $1 billion.
And the stock of Pacific Scientific (PSX) jumped 4-3/4, or almost 19 percent, to 29-7/8 after the electric motor maker agreed to be bought by Danaher Corp. (DHR) in a deal worth $460 million.
Banking shares also rose sharply, lifted by the Asian markets' solid performance and investor sentiment that the Pacific Rim might be pulling out of its financial crisis.
Shares of Citicorp (CCI) gained 5-5/16 to 124-5/16, Chase Manhattan (CMB) was up 4 to 111-3/16, and Dow component J.P. Morgan (JPM) rose 3-3/4 to 104-15/16.
Technology shares also took part in the market's bullish run. Oracle (ORCL) rose 1-7/16 to 24-11/16 and was the most active stock on the Nasdaq, adding to last week's strong gains after company officials told the World Economic Forum in Davos, Switzerland, the software maker's worldwide database business was likely to grow 15 to 20 percent this year.
Other gainers included Dell (DELL), up 5-1/8 to 104-9/16, and Intel (INTC), rising 2-1/16 to 83-1/16. Microsoft (MSFT) shares rose 5-9/16 to 154-3/4, despite the software giant's continuing legal problems.
On the losing side, shares of National Semiconductor (NSM) tumbled 4-5/8, or more than 16 percent, to 23-1/2 after the company issued an earnings warning.
--by staff writer Malina Poshtova Zang
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