NEW YORK — Just five weeks after Wall Street’s 554-point sell-off, the market closed up 18.15 points to 8050.16 Thursday, up 12% since Black Monday and taking the Dow to within flirting distance of its all-time high of 8299.49 set in August.
And the showbiz sector’s representative in the 30 stocks that make up the Dow, Walt Disney Co., has more than kept up with the market. Disney jumped 26% from the Oct. 27 slump to a high of $97.93 it hit Monday, lifted by both enthusiasm about new business developments next year and buying from foreigners seeking a “safe haven” from economic worries overseas, analysts said.
Disney stock has fallen back in the past couple of days as Disney chairman Michael Eisner unloaded 5.4 million shares, and the stock closed Thursday down $1.62 to $93.56. Even at that level, however, Disney is up 21% since the sell-off.
While the broader market rally hasn’t been as strong, it has lifted a cloud of uncertainty hanging over investors, Wall Streeters say.
‘Sigh of relief’
“Our clients are breathing a sigh of relief that the markets have recovered and the world hasn’t ended,” said Gregg Hymowitz, a principal of money management firm Entrust Capital.
“We feel that the reaction, or over-reaction, that most people have labeled the Asian contagion is ending and that is obviously causing money to come back into the marketplace,” he added.
Aside from Disney, most entertainment stocks have also recovered since the sell-off. Time Warner, which fell to $56.13, has since risen to a high of $61.25, although worries about its music and movies businesses have helped bring the stock back in recent days and it fell $1.37 to $58.12 Thursday.
Viacom, which traded down to $27.94 amidst the correction, has risen back around $35 although it fell 37¢ to $34.50 Thursday. News Corp. has particularly recovered, rising from its Oct. 27 close of $18.13 to Thursday’s close of $22 (up 31¢).
News has been helped by the Saudi Prince Alaweed’s buying of 5% and a better-than-expected September quarter profit, as well as by the reassuring performance of “Anastasia.”
Even the cablers have done well. Tele-Communications Inc. closed down 12¢ to $22.93 Thursday, up from $20.37 on Oct. 27.
“Cable is in a very good position for a couple of reasons,” says Lehman Bros. analyst Larry Petrella. “We’re in a very low interest-rate environment and cable is very recession-resistant,” important for any investors worried that the economy may eventually begin to falter.
Overall, the entertainment sector “is in favor and is going to hold up,” Petrella predicts.
He says Time Warner’s stock has become a little expensive at its current levels, given his valuation of the stock of about $66 based on next year’s earnings, but TW “is not way ahead of itself” yet.
While investors have shown some worries about the music group’s problems, stalling the stock at about $60, the company’s cable systems and cable programming businesses are continuing to perform very well, he said.
Disney stock rises
Disney, on the other hand, has gotten ahead of itself, Petrella said. Enthusiasm about next year’s opening of the Animal Kingdom at Disney World, the launch of its cruise ship line, the opening of “Lion King” on Broadway and foreign investors buying Disney have combined to cause the stock rise in recent weeks.
Disney stock often trades at a premium, however. “Everybody who owns it loves it and will never sell,” Petrella added.