With Calmed Fears over Brazil, Market Breathes Sigh of Relief

What looked like a major crisis for the real seems to have been averted.
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The Brazilian central bank has let the real fall out of the new trading band it set for the currency, and that is making for a bizarre morning on Wall Street.

Not that the bank's move was a surprise. From the outset, Brazil's ability to defend the currency with reserves that might in a time of capital flight make it to mid-February, seemed doubtful. And this, according to

The New York Times

is something that the U.S. government and the

International Monetary Fund

have been telling Brazilian president

Fernando Henrique Cardoso

: Trying to shore up the real would just be a colossal waste of money. What happened in Asia in 1997 would seem a case in point.

Though the real's dropping out of the band was first met with horror, the perception that the Cardoso government still listens to the U.S. and the IMF and that it will not be throwing away its money has calmed investor fears of Asia redux. Brazil's

Bovespa

was up 14%, and U.S. stocks look set to move higher at the bell.

"I think you're going to have a sigh-of-relief rally at the open based on the perception that Latin America is stabilizing," said Jim Volk, co-director of institutional trading at

D.A. Davidson

.

The

S&P 500

futures, up in the early going, collapsed on the news that the real broke its band and then rebounded. At 9 a.m. they were up 14, about 12 above fair value and indicating a jump at the open. Earlier, they were down 14.

"I'm hard pressed to figure out how they go up 14," said Todd Clark, head of listed trading at

Charles Schwab

, who would not chase the morning rally. He points out that when stocks gap higher at the open after closing at their lows, they usually give back some of their early gains. He's been impressed, however, by the futures' ability to bounce off the lows they hit on Wednesday.

Indeed, trying to figure where stocks will go today looks more and more like a mug's game. Ask people on Wall Street these days what's moving the market these days, and they'll probably just scratch their heads. More than one trader has compared the movements in the stock market these days to what you usually see in a hog pit.

Adding to the confusion, today is the monthly expiration of stock and index options. The recent rockiness of the market will make that less smooth than it could be; there is much more open interest today than is usually the case on expiration. And that in turn will make for more volatility.

"Expirations are crazy anyway," said Clark. "Given the fact that we have this uncertain backdrop, it's going to be even crazier."

The 30-year Treasury bond was off 28/32 to 102 2/32, lifting the yield to 5.11%.

Hong Kong rebounded off an early Wall Street-inspired drop to close only slightly lower. In the morning, the

Hang Seng

three times dipped below 10,000 -- a level where bargain hunters were happy to step in. The index closed down 35.73 to 10147.40. Elsewhere in the region, stocks in Singapore and South Korea both bounced back after selloffs yesterday, but Thai stocks saw fresh declines.

Japan's stock market was closed for Coming of Age Day.

European stocks clawed their way back from earlier losses. In Germany, the

Dax

was down 15.69 to 4897.06. In Paris, the

CAC

was up 26.33 to 4023.39. In London, the

FTSE

was up 18.7 to 5838.9.

Friday's Wake-Up Watchlist

By

Brian Louis
Staff Reporter

    Bell Atlantic

    (BEL)

    received preliminary indications from the

    Securities and Exchange Commission

    that it may use a favorable accounting method in its bid for

    AirTouch

    (ATI) - Get Report

    ,

    The Wall Street Journal

    reported, citing people close to the company.

    The

    Justice Department's

    antitrust division has requested additional information about the proposed merger of

    America Online

    (AOL)

    and

    Netscape

    (NSCP)

    , the

    Journal

    reported, citing people familiar with the situation.

    Volvo

    (VOLVY)

    has acquired a nearly 13% stake in

    Scania

    (SCV.A)

    . Volvo said it "welcomes a discussion with Scania's shareholders regarding the potential combination of Scania and Volvo." Volvo also said it has had discussions with Scania's main shareholder,

    AB Investor

    concerning a potential marriage of Scania and Volvo. Volvo said, however, it isn't making a public offer for Scania, but added it is "interested in pursuing a constructive dialogue with Scania's shareholders."

    (Earnings estimates are from

    First Call

    )

    Consolidated Papers

    (CDP)

    reported fourth-quarter earnings of 21 cents a share, beating the 12-analyst view of 15 cents, but down from the year-ago 40 cents. The company also reported full-year results and said the annual and quarterly results were disappointing due to declining prices for many of the company's coated and supercalendered printing papers.

    FPL Group

    (FPL) - Get Report

    reported fourth-quarter earnings of 54 cents a share, in line with the 13-analyst forecast and up from the year-ago 52 cents.

    General Electric's

    (GE) - Get Report

    NBC

    unit together with GE's

    GE Capital

    division jointly bought 1.2 million shares of

    Telescan

    (TSCN)

    in a private placement for $7.70 a share, which represents almost 10% of Telescan shares outstanding.

    Johnson Controls

    (JCI) - Get Report

    reported first-quarter earnings of 86 cents a share, beating the five-analyst consensus estimate of 83 cents and up from the year-ago 70 cents.

    Marketwatch.com's

    (MKTW:Nasdaq) 2.75 million-share IPO was priced top-range at 17 a share by

    BT Alex. Brown

    yesterday, and shares will begin trading today. Marketwatch.com, a business news Web site, is a joint venture between

    Data Broadcasting

    (DBCC)

    and

    CBS

    (CBS) - Get Report

    .

    Parker Drilling

    (PKD) - Get Report

    reported a first-quarter loss of 10 cents a share, down from the year-earlier earnings of 14 cents.

    Now this week's items from the

    oft-wrong Inside Wall Street Column in

    BusinessWeek

    .

    First Union

    (FTU)

    is likely to get back on the acquisition trail, the column said, but with one condition, however. Ed Crutchfield, First Union chairman and chief executive officer, was quoted as saying: "No expensive or high-premium super-acquisitions for us." He also is quoted as saying: "We will only go for a merger of equals." The column said some of the equals showing up on radar screens at First Union include

    Wells Fargo

    (WFC) - Get Report

    and

    Bank One

    (ONE) - Get Report

    . The column said Crutchfield declined to comment on whether he has approached those banks.

    The column also offers up positive articles on

    Cerus

    (CERS) - Get Report

    and

    Spiegel

    (SPGLA)

    .