Pre-election rally lifts Dow 35.9 Economic news fuels optimism

November 03, 1992|By Bloomberg Business News

NEW YORK -- U.S. stocks rallied yesterday as the economic news swung to the positive pole before today's presidential election.

The Dow Jones industrial average rose 35.93, to 3262.21, with computer-guided buy orders responsible for about 10 points of the gain, according to Birinyi Associates.

"The economy is on a recovery path," said James Solloway, director of research at Argus Research. "The low level of interest rates is finally translating into higher economic growth."

In rising, U.S. stocks ignored General Motors Corp.'s decision to halve its common stock dividend and to institute a wide-ranging management shake-up. The market also shrugged off Friday's gloomy economic news, including sales of new single-family houses, the Chicago purchasing managers index, and the University of Michigan's consumer sentiment index.

All told, inflation and interest rates remain low, corporations have become much more efficient by slashing costs, and the country is likely to emerge from recession soon, said John Blair, head equity trader at County NatWest Securities. This means that "no matter who wins, the country will move forward," he said.

Advancers outnumbered decliners by a margin of 9-to-5 among common stocks on the New York Stock Exchange. Trading was active, with about 204 million shares changing hands on the Big Board.

Standard & Poor's 500, up 4.07 to 422.75, was the standout yesterday. Over-the-counter stocks, little changed most of the session, jumped 2.41, to 607.58, late in the session.

"People are loading up on stocks and futures [Standard & Poor's 500 stocks for December delivery] in the widespread belief there's going to be a rally after [Arkansas Gov. Bill] Clinton wins," said Thomas Gallagher, managing director in charge of capital commitment at Oppenheimer & Co. "I suspect the rally might not happen" because the market is ahead of itself already, Mr. Gallagher said.

Electrical equipment, health care, automobiles, and drugs rose the most in the S&P 500, according to Bloomberg calculations.

General Motors topped the most active list, with more than 3.1 million shares traded. The next most active stocks were GM class E, Spectrum Information Technologies, Intelligent Electronics Inc., and Tele-Communications Inc. class A shares.

After being delayed most of the morning, GM shares rose $1.125, to close at 31.875, following news of a broad management shake-up that had been rumored since the previous Monday's resignation of Chairman Robert C. Stempel.

Trying to stem record losses, GM yesterday named John F. Smith Jr. to the post of chief executive, elected outside director John Smale as chairman, and chose William Hoglund to head its North American auto staff. GM also said it plans to swap preference stock held in its pension plans for class E shares. The news sent the class E shares down $1 to $28.

Intelligent Electronics dropped $2.25, to $8.50, after talks collapsed to sell its BizMart chain of office and computer superstores to a unit of Kmart Corp.

Tele-Communications climbed 25 cents, to $17. On Friday, a $350 million issue of TKR Cable I Inc. senior debentures due Oct. 30, 2007, was priced to yield 10.5 percent by investment bankers led by Merrill Lynch. TKR, a unit of Tele-Communications, on Thursday slashed by more than half its planned public bond sale and said it would borrow the difference from banks.

Spectrum rose $1, to $2.25. Company officials weren't available for comment on the stock activity.

International Business Machines Corp. rose $2.125, to $69, continuing to recover from a recent slump. Yesterday, the company unveiled additions to its disk-drive line and announced a marketing and technology alliance with Harris Corp.

Electronic Arts slumped $3, to $29.50, after Piper Jaffray removed the stock from its "buy" list, citing concerns about a sales shift in the game systems market.

Sun Microsystems, down $1.375, to $33.875, continued to weaken after a Hambrecht & Quist analyst recommended Friday that investors seeking returns over the next three months sell the stock.

Merck rose 87.5 cents, to $44.75, following news the company will launch an advertising campaign to promote awareness of prostate enlargement, a condition its drug Proscar is designed to treat.

Cray Computer gained 25 cents, to $5.50, after the company said it intends to form an alliance with Thinking Machines Corp.

The Arms index, a measure of traders' and investors' current views, closed at 0.55.

A reading above 1 is considered bearish, while a figure below 1 is considered bullish. The index compares advancing and declining volume to the number of advancing and declining stocks.

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