Washington, 9 September 1998 (RFE/RL) -- After more than a week of mostly plunging downward, American stock exchanges joined their counterparts in Europe and Asia Tuesday in price rallies.
Two market indexes recorded their highest point increases ever in one day -- the NASDAQ market composite index was up more than 94 points, an increase of six percent, and the Dow Jones average of 30 industrial stocks traded on the New York stock exchange rose over 380 points, an increase of nearly five percent.
Other stock exchanges in the U.S. also recorded strong increases in their average prices. But as in every day of stock trading, not all stocks rose in value. On the New York exchange, for example, 2,500 stocks rose in value, while 611 declined in price and 396 remained unchanged.
The rally meant that many investors, who had sold off stocks in recent weeks to shift money into bonds, were moving their money back into stocks. That lowered the price of bonds sharply.
Commentators and analysts were quick to credit the remarks of U.S. Federal Reserve (Central Bank) Chairman Alan Greenspan last Friday for the rally. He hinted that the Fed might consider lowering interest rates later this month. The suggestion of lower interest rates, which usually help companies expand business while cutting costs, prompted many investors to want to buy stocks at the lower prices resulting from last week's declines.
Greenspan did not, however, specifically say the federal reserve would in fact lower interest rates. But the mere hint from his remarks sent investors and stock analysts scrambling.
Little attention seemed to be paid to the two days of price rallies on the stock markets in Asia and Europe. U.S. markets were closed on Monday for the Labor Day holiday, and Tuesday trading was completed in Asia and nearly finished in Europe before American markets opened for business.
The only impact from the swing upward in the Asian and European markets appeared to be as a positive underline for Greenspan's remarks. In fact, a number of commentators and analysts in the U.S. said the negative effects of the financial crises in Russia, Asia and Latin America on the U.S. had already been taken into account.
While the experts were saying that the Russian impact is more psychological than economic -- Russia produces less than two percent of the world's gross domestic product (GDP) -- its troubles are impacting one small segment of the U.S. economy.
The U.S. Agriculture Department says that nearly 40 percent of American poultry meat exports go to Russia, accounting for nearly two-thirds of the value of total U.S. agricultural exports to Russia.
Thus the continuing devaluation of the Russian ruble means that purchases of dollar-priced American poultry meat will certainly fall dramatically, which will seriously hurt U.S. poultry producers. Russia was buying an estimated six percent of total U.S. poultry production, says the department, and imports have been supplying 70 percent of all the poultry meat consumed in Russia.
Still, American officials emphasize that overall the U.S. economy remains very strong and that the fundamentals support strong stock prices. White House spokesman Michael McCurry said on Tuesday that it's the ability of the U.S. economy to sustain growth over time with low interest rates, low unemployment and other indicators that ought to reassure the American people in the "midst of the bad weather that the global economy is experiencing."
Commentators and analysts in the U.S. markets noted, however, that whether there will be further downward movement in stock prices remains the big unknown.