As rates fall, stocks rise Dow up 23

WALL STREET

June 25, 1993|By Bloomberg Business News

NEW YORK -- Stocks rebounded yesterday from a two-day slump as a slide in long-term interest rates and a positive earnings report from Goodyear Tire & Rubber Co. fueled a rally.

The Dow Jones industrial average surged 23.80, to 3,490.61, after having closed Wednesday at the lowest level since May 18. A rally in Goodyear's stock accounted for one-fifth of the Dow's rise. Computer-driven buy orders added to the market's advance.

The Standard & Poor's 500-Stock Index rose 3.43, to 446.62, and the American Stock Exchange's Market Value Index climbed 0.60, to 435.30. The Nasdaq Combined Composite Index rose for the first time since last Friday, gaining 3.93, to 688.72.

Advancing common stocks on the New York Stock Exchange exceeded declining issues by about 3-to-2. Trading was moderate, with about 267 million shares changing hands.

"The market finally pulled off a rally after a couple of tough days," said Barry Berman, head trader at Robert W. Baird & Co. "I doubt the strength will last because of overhanging concern about the economy and earnings."

The Labor Department released a pessimistic report yesterday about the economy's strength. It said the number of Americans who filed claims last week for first-time unemployment benefits rose 8,000, to a seasonally adjusted 353,000. The rise in jobless claims exceeded economists' estimates.

The employment report caused long-term interest rates to fall amid renewed confidence that the Federal Reserve Board will not act soon to raise interest rates.

The yield on the benchmark 30-year Treasury bond hit a two-month low of 6.73 percent, down 3 basis points from Wednesday. As bond yields decline, stocks become more attractive relative to Treasury bonds.

"While we don't deny that the economy is going through another one of its soggy phases, it certainly is not contracting," said James Solloway, research director at Argus Research Corp.

TC "In addition, investors should take some solace in the fact that inflation concerns have faded back into the woodwork," and that means the Fed will not raise interest rates, Mr. Solloway said.

The stock market received its first positive earnings report in a while when Goodyear said second-quarter earnings would rise as much as 31 percent, to $140 million, or up to 96 cents a share, from $106.9 million, or 75 cents a share, in the year-ago period.

Goodyear's stock responded to the earnings announcement by climbing $1.75, to $40.75.

Goodyear's earnings report helped offset recent negative earnings announcements from such leading companies as Minnesota Mining & Manufacturing Co., Kmart Corp., Apple Computer Inc., AMR Corp., USAir Group Inc., H.J. Heinz Co. and Hewlett-Packard Co.

Still, analysts predict that second-quarter earnings will exceed last year's results by about 20 percent, according to Institutional Brokers Estimate System, a research firm that tracks analysts' forecasts. Companies listed on the Standard & Poor's 500 Index are expected to have composite earnings of $6.48 a share, up from $5.40 in the prior year.

"Economywide, corporate earnings, too, continue to improve -- 3M's problems notwithstanding," Mr. Solloway said.

Intel fell $1.25, to $53.75, after PaineWebber Inc. lowered its rating on the semiconductor company to "neutral," from "attractive," because of concern about sluggish demand in the personal-computer market.

Sun Microsystems gained $1.25, to $28.625. The computer-workstation manufacturer said it planned to buy back

up to 10 million, or 9.5 percent, of its shares.

USX-U.S. Steel Group Inc. declined $1.25, to $41.125. USX Corp. said it had filed to sell 9 million common shares of the steel producer.

Several smaller companies -- including Digital Microwave Corp., Isomedix Inc., Sybron Chemicals Inc., Sanborn Inc. and Read-Rite Corp. -- reported discouraging earnings reports.

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