Stocks post small gains Dow up 4.3

April 07, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks posted small gains, extending Tuesday's biggest one-day rally in almost 2 1/2 years, as concern about inflation and interest rates receded.

Large stocks got a boost as U.S. automakers said sales of cars and trucks continued to be strong in March, while smaller issues were mixed as a planned merger between Southwestern Bell Corp. and Cox Cable Communications collapsed, raising concern that other agreements may unravel.

"The market has stabilized and will probably move up pretty significantly" in coming weeks, said Thom Brown, managing director of Rutherford, Brown & Catherwood Inc. in Philadelphia.

The Dow Jones industrial average rose 4.32, to 3,679.73, fueled by a $3.875 gain in Caterpillar Inc., to $120.125, which added almost nine points to the average.

The Standard & Poor's 500 index fell 0.23, to 448.06, as automobile, financial, oil, chemical and semiconductor stocks climbed. The Nasdaq combined composite index dropped 0.23, to 750.72, after posting the second-largest gain in its history Tuesday.

More than five stocks advanced for every four that declined on the New York Stock Exchange. Volume on the Big Board dropped to 302 million shares from 366.01 million Tuesday.

"There are no inflationary indications around at the moment," said Mr. Brown. For instance, "gold prices are lower and the bond market has stabilized." Gold futures, often used as a proxy for inflation expectations, rose 40 cents an ounce, to $387.10, and is down from $394.30 last Thursday.

Stocks also were lifted as yields on the benchmark 30-year Treasury bond remained steady, rising to 7.26 percent from 7.25 percent Tuesday, after jumping as high as 7.32 percent early in the day.

On Tuesday, yields dropped from a 15-month high of 7.44 percent, reached on Monday.

Bond yields climbed after the Washington Post reported the Federal Reserve won't raise interest rates again until financial markets settle down, raising concern that the Fed won't contain inflation expectations.

Yields retreated later after a report that last month's car sales met but didn't exceed expectations.

Investor sentiment toward cable TV and phone stocks was hurt by the failure of a proposed agreement between Cox Cable and Southwestern Bell to form a $4.9 billion cable-television partnership, and by a federal court ruling that dealt a setback to a planned $12.6 billion merger between American Telephone & Telegraph Co. and McCaw Cellular Communications Inc.

The AT&T-McCaw ruling is "causing some concern that the deal may not go through, and if it does, it will be pushed back," said Richard Ciardullo, head trader at Eagle Asset Management in St. Petersburg, Fla.

Coming six weeks after Bell Atlantic Corp. scrapped its planned merger with Tele-Communications Inc., the announcements are "another indication that these deals can't get done," Mr. Ciardullo said. Meanwhile, "a lot of money is being lost" on stocks that soared on takeover speculation.

McCaw dropped $1.75, to $48; Comcast Corp. Class A shares fell $1.125, to $17.75; Tele-Communications dropped 93.75 cents, to $19.9375; and ECI Telecommunications Ltd. slid $1.125, to $22.

AT&T dropped 75 cents, to $51.25; Southwestern Bell fell 25 cents, to $39.25; and Bell Atlantic declined 62.5 cents, to $49.50.

Some traders said the outlook for stocks was bright after the past two months' slump. "I don't think we're in the throes of a bear market by any definition," said Chris Willox, an equity trader at BT Brokerage, a unit of Bankers Trust New York Corp.

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