Drug stocks' gains help push Dow up 7


August 18, 1993|By Bloomberg Business News

U.S. stocks rose for a third straight session, fueled by gains in the drug industry and optimism about low interest rates.

The Dow Jones industrial average closed 7.83 higher at a record 3,586.98, breaking the previous high of 3,583.35 set last Wednesday.

Drug stocks led the advance. "These stocks have been in the doldrums for so long and they're finally starting to show signs of life," said Ronald Nordmann, an analyst at PaineWebber Inc.

The rise in drug stocks was led by Glaxo Holdings PLC, which received approval from the Food and Drug Administration to market an injectable version of Zofran to help stop nausea after operations.

Glaxo's American depositary receipts, each of which represent two ordinary shares, rallied $1.25, to $16.75. Merck & Co. rose $1.375, to $30.875 and Pfizer Inc. advanced $1.25, to $60.50.

The group also got a lift from President Clinton's announcement that any revamping of the nation's health care system would be phased in over several years.

"It appears now that any near-term impact related to health-care reform will be minimal," Mr. Nordmann said.

Offsetting the rally in drug stocks was a slide in computer-related issues such as Hewlett-Packard Co., which reported lower-than-expected earnings.

"This market is waffling as strengths in some pockets of the market are matched by weakness in other parts," said Richard Meyer, head of institutional trading at Ladenburg, Thalmann & Co.

Hewlett-Packard slumped $1.50, to $73.75. The company posted a 44 percent increase in fiscal third-quarter earnings, but the results were still below analysts' forecasts. The company earned $1.06 in the quarter. Analysts expected the company to earn closer to $1.20 a share.

Aside from company reports, stocks continue to get a lift from long-term interest rates, analysts said. The yield on the 30-year Treasury bond fell to a record 6.27 percent after the government released more evidence that the economic recovery is sluggish.

The Commerce Department said housing starts fell 2.7 percent in July to an annual rate of 1.21 million. Economists were estimating that housing starts fell 1.1 percent in July to an annual rate of 1.24 million, according to a survey by Bloomberg Business News.

"This is a fragile economic recovery," said Peter Anderson, senior vice president in the mutual funds division at Federated Investors in Pittsburgh. Mr. Anderson said he is concerned about the stock market's ability to rise much further.

"We're close to the point where there is considerable risk in this market," Mr. Anderson said. The stock market will fall 10 percent if interest rates turn suddenly higher, he said. The money manager said he isn't selling stocks yet.

Trading on the Big Board was active, as 261.2 million shares changed hands.

Intel Corp., Merck, McCaw Cellular Communications Inc., Town & Country Trust and Philip Morris Cos. were the five most actively traded issues on the U.S. composite.

McCaw declined 25 cents, to $56, after climbing $5 yesterday to an all-time high, on the news that the company will be acquired dTC in a $12.6 billion merger by telecommunications giant American Telephone & Telegraph Co.

Cellular stocks rallied for a second straight day as the AT&T-McCaw announcement prompted speculation of other business combinations between telephone and cellular companies. Nextel Communications Inc. gained $3.125, to $37.25, and Vanguard Cellular Systems Inc. rose $2, to $33.25.

Equitable Cos. gained $1.375, to $29.125. Chairman Richard Jenrette said the company plans to sell a stake in its Donaldson, Lufkin & Jenrette Inc. securities subsidiary to the public next year.

Philip Morris rose $1.875, to $48.375, after Oppenheimer & Co. investment strategist Michael Metz recommended the stock in the Wall Street Journal's "Investment Dartboard" column.

Warner-Lambert Co. gained $1.75, to $67.875. The drug manufacturer agreed with the FDA to stop manufacturing certain drugs until it resolved manufacturing problems at six facilities.

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