Optimism over second-quarter performance nudges up stocks

July 19, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks rose yesterday for a fourth day as software and retail issues rallied and confidence grew that second-quarter earnings will show bigger gains than expected.

Microsoft Corp. rose after a favorable antitrust settlement, leading a rebound in technology stocks.

A host of companies reported unexpectedly strong profits. "Corporate earnings are going to remain solid for the next 3 1/2 years," because companies have invested in technology, curbed debt and kept payrolls under control, said Philip Orlando, equity portfolio manager at First Capital Advisers.

The Dow Jones industrial average rose 1.62, to 3,755.43, after falling as much as 14.24. Aluminum Co. of America, J. P. Morgan & Co. and Texaco Inc. paced the advance. The average, which gained 1.2 percent last week, traded in its narrowest range since June 9.

The Standard & Poor's 500 Index increased 1.06, to 455.22, after falling as much as 0.90, as oil, software, retail, insurance and regional bank stocks gained.

The Nasdaq Composite Index added 1.26, to 722.63, after falling as much as 2.15, helped by rising prices for Microsoft, Cisco Systems Inc., MCI Communications and Tele-Communications Inc.

Almost 11 stocks rose for every 10 that fell on the New York Stock Exchange, where trading slid to 227.46 million shares from 273.3 million Friday.

Companies ranging from Chase Manhattan Corp. to Inland Steel Industries Inc., and from NationsBank Corp. to Upjohn Co., reported earnings that were above expectations. On average, earnings should increase 15 percent in the second quarter, said John Shaughnessy, director of research at Advest Inc. in Hartford, Conn.

Only 15 percent of the S&P 500 stocks have reported earnings so far this quarter, said William Dodge, chief investment strategist at Dean Witter Reynolds, and most of them are "reporting right in line with expectations. I don't think you've seen enough second-quarter earnings" to decide if results are going to exceed forecasts, he said.

Traders said any optimism aroused by strong quarterly profits is also being undermined, in part, by trepidation about this week's remarks by Alan Greenspan. The Federal Reserve chairman is scheduled to give the Fed's economic review to Congress tomorrow.

"The market is very concerned every time Greenspan goes up to [Congress] and opens his mouth," said Mr. Orlando of First Capital Advisers. "Yet all the data in the past week or two suggests the Fed doesn't have to do anything" to raise rates.

Reports last week on wholesale and consumer prices in June showed inflation remained in check as the economy continued to expand.

Yields on the government's 30-year Treasury bonds fell to 7.50 percent yesterday, the lowest since June 27, from 7.54 percent Friday.

Microsoft Corp. climbed $1.875, to $50.50, leading software makers higher. The company escaped a major disruption in its business by agreeing to settle a long-standing antitrust case with the Justice Department.

Microsoft's gains helped lead other technology issues higher. Novell Inc. rose 31.25 cents, to $17.125; Oracle Systems Corp. rose 43.75 cents, to $39.5625, and Autodesk Inc. added 37.5 cents, to $53.125.

Retailers gained on expectations of sales gains after sales rose 0.6 percent in June, up from a 0.4 percent decline in May and 1 percent drop in April. Wal-Mart Stores Inc. added 62.5 cents, to $25.875, and Kmart Corp. rose 12.5 cents, to $16.375.

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