Rising optimism on earnings lifts Dow 14.9, to a record 3,798

January 06, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks rose yesterday, with the Dow Jones industrial average setting a record high, as evidence that economic growth is accelerating created optimism about the prospects for corporate earnings.

"The equity market wants to see some strength in earnings and the economy in general, rather than being led solely by interest rates," said Todd Clark, senior block trader at Mabon Securities.

The Dow Jones industrial average rose 14.92 points, to 3,798.82, breaking the record of 3,794.33, set Dec. 29. Composite volume on the New York Stock Exchange was extremely heavy, amounting to more than 400 million shares.

Five stocks rose for every four that fell on the Big Board.

Among broader measures, Standard & Poor's 500 Index closed 0.66 higher, at 467.55, below the record of 470.94, set Dec. 28. Gains in computer stocks pushed the Nasdaq Combined Index up 3.77, to 778.05, its seventh gain in eight days. The American Stock Exchange Market Value Index rose 1.43, to 478.79.

Share prices dropped most of the morning and then rallied. Investors loaded up on economically sensitive stocks likely to perform well in a recovery, fueling the gains, analysts said.

"Our bent is very cyclical in nature right now," said Ronald K. Stribley, who manages about $1 billion for Glenmede Trust Co. in Philadelphia. "We've had a depressed environment over the past few years for these shares."

The early decline in stocks came as interest rates rose. The yield on the 30-year Treasury bond was at 6.40 percent, up 63 basis points from the Oct. 15 low of 5.77 percent. The rise in rates reflects concern that the strength of the economic recovery might prompt the Federal Reserve to boost money market rates.

In the latest economic statistics, the U.S. Commerce Department reported yesterday that factory orders for November climbed 1.4 percent.

The gain in factory orders strengthened demand for some blue-chip stocks, said Don Hays, director of investment strategy at Wheat First Butcher & Singer. The report bolstered the belief ++ "that the economy is picking up all over the world," Mr. Hays said.

Paper stocks, one group that tends to track the economy's performance closely, were among the session's best performers.

Oppenheimer & Co. paper analyst Gary Palmero raised his ratings on four paper companies: Federal Paper Board Co., which went up $2.375, to $24.75; Temple-Inland Inc., up $2.25, to $52.625; International Paper Co., up $2.75, to $72.375; and Georgia-Pacific Corp., up $2.125, to $72.25.

"Investors are seeking those issues that have been depressed," said Peter Cardillo, director of research at Westfalia Investments Inc. "They feel safer in many of these issues right now."

Within the S&P 500, telephone companies, retail stores and electric companies were among the worst performers, while oil companies and drug stocks were among the best.

Oil stocks rose as the price of crude for February delivery advanced 67 cents, to $15.34 a barrel. Royal Dutch Petroleum Co. shares added $1.625, to $105.875; Chevron Corp. was up $1.25, to $90.75; and British Petroleum Plc gained 87.5 cents, to $64. Pogo Producing Co., which was added to the Goldman, Sachs & Co. "priority" stock list, rose $1, to $18.

Among drug stocks, Merck & Co. shares added $1.25, to $37.25. Thedrug company made changes that might position Martin Wygod to become chairman. Mr. Wygod founded Medco Containment Services Inc., which recently merged with Merck.

Among individual stocks, Mobile Telecommunication Technologies Corp. was the most actively traded issue. The company closed $9.625 lower, at $16.50, after it said it expects to record a loss from operations in 1994.

Telecommunications equipment makers rallied after MCI Communications Corp. said Tuesday that it planned to invest more than $20 billion in a national telecommunications system, including local telephone networks. DSC Communications Corp. added$2.625, to $67.25, and Newbridge Networks Corp. added $3.25, to $60.75.

Borden Inc. unveiled a restructuring plan that includes the sale of its snack-food business. The consumer products company also said it would halve its dividend and report a loss of $4.18 to $4.26 a share for 1993. The stock dropped $2.375, to $15.875.

Personal computer manufacturers rallied as a Dataquest Inc. report showed PC sales rose 16 percent last year. Digital Equipment Corp., which named Vincenzo Damiani head of its European operations, added $2.125, to $36.875; Apple Computer Inc. gained $2.25, to $33.75; and Compaq Computer Corp. rose $1.75, to $76.50.

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