Stocks rise for 3rd day utilities slump

February 17, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks climbed yesterday for a third straight day, as rallies in Hewlett-Packard Co. and Boeing Co. offset a slump in electric utility shares.

The Dow Jones industrial average gained 9.00, to 3,937.27, while the Standard & Poor's 500 Index advanced 0.27, to 472.79. The Nasdaq Combined Index climbed 2.50, to 792.62, led by gains in Intel Corp. and Oracle Corp. The American Stock Exchange Market Value Index closed 0.48 higher, at 475.32.

Meanwhile, the Dow Jones utilities average fell 2.70, to 212.76. The average sits not far from its June 30, 1992, low of 211.13. Because the utilities average is viewed as a barometer of interest rates, yesterday's weakness suggests some investors expect interest rates to rise further, traders said.

"Obviously, the market is dictating that interest rates are going to go up again," said Kenneth Ducey, head trader at BT Brokerage.

At yesterday's low, the utilities average was down 17.3 percent from its record 256.46, set Sept. 13, 1993, one month before the yield on the benchmark 30-year Treasury bond tumbled to a record low of 5.77 percent. The yield on the 30-year bond yesterday was 6.45 percent. As rates rise, risk-averse investors tend to move money into fixed-income investments from stocks.

"We have reached a point where interest rates have stopped going down, and that's about the only thing utility stocks have had going for them," said Stanley Rourke, senior vice president at National City Trust-Kentucky, who manages $450 million.

Yesterday, Houston Industries Inc. and Peco Energy Co. led the decline in the utilities average. Houston Industries fell 87.5 cents, to $42.25. Peco, which went ex-dividend yesterday, declined $1, to $25.875.

"Except for technology stocks, the market is beginning to show some real signs of weakness," said William Lord, a trader at UBS Securities Inc.

The rally in computer-related stocks was led by Hewlett-Packard, which reported higher-than-expected earnings. The company said fiscal first-quarter earnings rose to $1.42 a share from $1.03 the year before. The results were above analysts' estimates of $1.21 a share, according to a survey by Institutional Brokers Estimate System Inc.

Shares of Hewlett-Packard rose $3.625, to $89.125, and that strength spilled into other computer stocks. Motorola Inc. rose $3.125, to $104.50; Intel gained $2, to $67; Texas Instruments Inc. climbed $2.125, to $78.50; and Micron Technology Inc. advanced $1.125, to $62.625.

Shares of Boeing Co. soared $2.25, to $46.625. It said it plans to increase production of 767 wide-body jetliners to four a month from three and decrease output of the 757 narrow-body planes to four a month from five.

The higher production of the 767s will add about $250 million to Boeing's revenue base in 1995, said Peter Aseritis, an analyst at CS First Boston, who raised his rating to "buy" from "hold."

Boeing and McDonnell Douglas Co. received a $6 billion order to supply commercial aircraft to Saudi Arabia. The order is expected to be among the biggest for the world's aircraft manufacturers over at least the next 18 months. McDonnell Douglas climbed $1.875, to $118.875.

Trading on the Big Board was moderate, with about 295.4 million shares changing hands. The average of the past three months was 287.25 million shares.

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