Dow jumps 33 to a record 3,638

WALL STREET

August 25, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks sprinted to all-time highs yesterday amid better-than-expected earnings from tractor maker Deere & Co. and falling interest rates.

Computer-guided buy orders added fuel to the rally in the final hour, traders said. The buying came after the Treasury's sale of new two-year notes drew more demand than expected and long-term rates fell toward 16-year lows.

"When the bond market kicked in this afternoon, the stock market took off," said Barry Berman, head trader at Robert W. Baird in Milwaukee.

The Dow Jones industrial average soared 32.98 points to 3,638.96, shattering its previous record of 3,615.48, set Friday. The 30-stock average had closed at record highs for four successive sessions before falling 9 1/2 points Monday.

Broader market indexes also surged. Standard & Poor's 500 Index jumped 4.54, to 459.77, surpassing its old record of 456.43, reached Thursday. The Nasdaq Combined Composite Index rose 4.28, to 735.14, exceeding its previous high of 734.83, set Aug. 18.

Both the New York and American stock exchange indexes broke records set Friday. The NYSE Composite Index rose 2.24 to 255.15, breaking its record of 253.25, and the Amex Market Value Index gained 4.69 to 453.20, surpassing the old high of 448.70.

Advancers swamped decliners by 11-to-5 among stocks on the New York Stock Exchange. Trading was active, with 270.7 million shares changing hands on the Big Board, up from 212.5 million yesterday.

The yield on the benchmark 30-year bond, which hovered around 6.22 percent much of the day, slumped to 6.19 percent after the note auction, down 3 basis points from late Monday. The record low of 6.18 percent was set Thursday.

"The general sentiment was all set for the stock market to move higher," said Mr. Berman of Robert W. Baird. "I think people came in yesterday expecting a sell-off, but volume just dried up because there was absolutely nothing for sale. The market started rallying yesterday afternoon and carried over from that."

Stocks opened higher in response to rallies in European equity markets, spawned by renewed hopes that Germany's Bundesbank will cut interest rates when its policy-making council meets tomorrow after a monthlong recess. French Prime Minister Edouard Balladur and German Chancellor Helmut Kohl are slated to meet tomorrow in Bonn, raising speculation about the possibility of coordinated rate cuts.

Britain's FT-SE 100 rose 7.30 to 3,049.30, France's CAC 40 gained 12.03 to 2,123.40, and Germany's DAX rose 9.42 to 1,897.69.

"To the degree that the international economies improve, that helps our equities and the companies that are operating there," said Paul Dow, chief investment officer at Piper Capital Management, which has about $11 billion under management.

Later, shares of several companies whose earnings are closely tiedto the economy's performance rose to their highest levels in the past year in response to the earnings report from Deere, a maker of farm equipment.

"Everyone figures if Deere had a good quarter, Tenneco's going to have one and Caterpillar's going to have one," said Edward Laux, head trader at Kidder, Peabody & Co.

Caterpillar Inc., one of the world's largest producers of construction equipment, rose $1.75, to $82.375, and set a 52-week high of $83 yesterday. Tenneco Inc., whose J. I. Case division makes farm equipment, rose $1, to $52.875. The stock reached a 52-week high of $53.50 during the day yesterday.

Deere's fiscal third-quarter net income surged more than tenfold, to $1.31 a share from 12 cents a year ago, thanks to higher sales of combines and tractors, as well as lawn and grounds-care equipment. Analysts had expected earnings of 85 cents a share, according to Zacks Investment Research.

"Earnings like these from large companies show the economy is hanging in there, so people feel a little more comfortable about putting money in the market," said Richard Meyer, head of institutional trading at Ladenburg, Thalmann & Co.

Deere's shares vaulted $5.25, to $74, having set a 52-week high of $74.75 earlier in the day.

Telephone, international oil, long-distance carriers, and auto stocks paced the surge in the S&P 500.

Bell Atlantic Corp. rose $2.625, to $59.375. The regional Bell operating company said a federal court declared unconstitutional a provision of the 1984 Cable Act that barred it from providing cable service in the same areas that it provides phone service. Bell Atlantic also said it plans to buy back as much as $1 billion of its stock.

Caterpillar, American Telephone & Telegraph Co., General Motors Corp., International Paper Co. and Philip Morris Cos. led the surge in the industrial average.

Philip Morris climbed $1.625, to $51.25. The tobacco and food company is expected to raise its dividend today.

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