Upbeat economic report spurs record

January 29, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks climbed to records yesterday amid expectations that interest rates will stay low, boosting corporate profits as the economy improves.

The Commerce Department said the U.S. economy grew at an annual rate of 5.9 percent in the fourth quarter, the fastest pace in six years. The report said a measure of price increases rose at a 1.3 percent rate in the quarter, the lowest since 1967.

"This is just great news," said Robert Streed, who manages about $360 million for Northern Investment Counselors, a unit of Northern Trust Co. "The good inflation outlook allows long-term interest rates to drop, and better economic news helps the stock market."

The Dow Jones industrial average gained 19.13, to a record 3,945.43, its 11th closing high this year. Caterpillar Inc., Procter & Gamble Co. and J.P. Morgan & Co. paced the advance. The average, up 30.95 points for the week, has risen 5.1 percent in January, more than triple the month's historical average gain of 1.38 percent.

The Standard & Poor's 500 Index climbed 1.65, to a record 478.70, exceeding the previous high, set Thursday. General retail stores, money center banks and brokerages and financial services companies led the gain.

The Nasdaq Combined Composite Index rose 3.65, to a record 796.53, surpassing its old high of 794.29, set Jan. 21. Intel Corp., Cisco Systems Inc., Microsoft Corp., and Lin Broadcasting Corp. were among the index's best-performing stocks.

The Dow Jones transportation average leapt 13.51, to 1,834.59, ending just shy of its record close of 1,834.81, set on Jan. 14.

Five stocks rose for every three that fell on the New York Stock Exchange. Trading was active, with about 313 million shares changing hands on the Big Board.

"As far as I am concerned, the outlook for stocks is bullish," said Thom Brown, managing director at Rutherford, Brown & Catherwood Inc. "Rates are low and earnings are growing at a robust rate."

Texas Instruments Inc., for example, beat analysts' expectations with a 72 percent increase in fourth-quarter earnings. Shares of the semiconductor company closed up 12.5 cents, at $71, after rising as high as $72.75.

In addition to the GDP report, a rally in bonds eased concern about a possible increase in short-term interest rates by the Federal Reserve, traders said.

Reflecting the belief that inflation is in check, the yield on the benchmark 30-year Treasury bond dropped as low as 6.18 percent from Thursday's close of 6.26 percent. The record low is 5.77 percent, set Oct. 15.

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