Stocks rebound, fueled by oil, new-home sales report

February 03, 1994|By Bloomberg Business News

NEW YORK -- A rally in oil shares and a bullish report on new-home sales helped stock prices recoup Tuesday's losses yesterday.

The stock market also got a boost from better-than-expected earnings from Sprint Corp. and Emerson Electric Co. and a decline in long-term interest rates, traders said.

The Standard & Poor's 500 Index jumped 2.38, to a record 482, surpassing the high of 481.61 set Monday. Other broad market measures also set highs. The Dow Jones industrial average rose 11.53, to 3,975.54, ending shy of Monday's record close of 3,978.36.

"The growth is out there in the economy, and inflation is still not a problem," said Philip Tasho, managing director for equity strategy and management at Riggs Investment Management Corp. The firm manages about $500 million in equities.

Oil stocks led the market's advance, as heating oil jumped to its highest price since October. Forecasts for more cold weather across the eastern United States will keep demand strong for weeks, traders said.

The Dow industrial average was buoyed by gains in its three oil-stock components. Texaco Inc. climbed $1.25, to $67.75; Chevron Corp. climbed 62.5 cents, to $93.875; and Exxon advanced 87.5 cents, to $67.125.

West Texas Intermediate, the benchmark U.S. crude, rallied 85 cents a barrel in the past two days, closing yesterday at $16.04 a barrel.

The Nasdaq Combined Index closed up 2.33, at 799.57, falling short of Monday's record close of 800.47. The rise was constrained by a plunge in Amgen Inc., which dropped $3, to $44, after the biotechnology company posted lower-than-expected earnings.

Other market gauges surpassed highs set earlier this week. The American Stock Exchange Market Value Index rallied 1.90, to a record 487.89, and the Dow Jones Transportation Average rose 9.05, to 1,862.29.

On the New York Stock Exchange, 11 stocks advanced for every seven that declined. Trading was active, with about 329 million shares changing hands on the Big Board.

The stock market was bolstered by more signs of a strengthening economy. The Commerce Department reported new-home sales in December surged 11.4 percent, to an annual rate of 862,000 units, the fastest rate since 1986. Last week, the Commerce Department reported gross domestic product rose at annual rate of 5.9 percent in the fourth quarter, the fastest pace in six years.

Stocks are "in better shape" with housing sales above 800,000 units, said Thom R. Brown, managing director at Rutherford, dTC Brown & Catherwood in Philadelphia, which manages $260 million. "There is a good chance that the Dow can hit 4,000 before the week is out."

L The industrial index has risen 5.9 percent so far this year.

Within the Dow, gains in oil stocks and General Electric Co. overwhelmed a plunge in Sears Roebuck and Co.

Sears closed $2.50 lower, at $51.25, amid concern that its Allstate Corp. insurance unit may see losses of $350 million from the Los Angeles earthquake. The concern prompted an analyst at Prudential Securities Inc., L. Wayne Hood, to remove his "buy" rating of Sears, which owns 80.1 percent of Allstate. Allstate dropped 50 cents, to $28.

GE rallied $2.25, to $109.125. The stock may have been helped by optimism about ratings at GE's television network, NBC, better-than-expected earnings at Emerson Electric, and a recent interview in Fortune magazine in which GE Chairman Jack Welch hinted GE may be seeking a large acquisition, traders and investors said.

"GE is almost the new IBM," said Michael Schroeder, a money manager at First International Asset Management, which oversees about $75 million. "It's taking its place in a lot of people's minds as the new bellwether Dow stock."

Concern about interest rates and inflation eased, meantime, as the yield on the benchmark 30-year bond dropped to 6.28 percent yesterday from 6.32 percent late Tuesday.

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