Deere's gains pace market as Dow climbs 24.61

August 24, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks surged yesterday as stronger-than-expected earnings by Deere & Co. fueled gains in farm-equipment stocks and speculation mounted that Philip Morris Cos. may raise its dividend or buy back more shares.

Computer-guided orders to buy stocks drove up prices soon after the Treasury auctioned $17.25 billion of two-year notes, according to Birinyi Associates Inc. A rising dollar helped reassure overseas investors about the safety of U.S. assets, traders and analysts said.

Stocks are in "the final leg of a summer rally that could take us to the February highs," said Joseph DeMarco, head trader at HSBC Asset Management, a unit of Hongkong & Shanghai Bank. He said "there are no major negatives in the market," since the Federal Reserve is unlikely to raise interest rates again before mid-November, bonds and the dollar have steadied, and corporate profits are generally better than expected.

The Dow Jones industrial average jumped 24.61, to 3,775.83, paced by rises in Caterpillar Inc., Philip Morris and AlliedSignal Inc., which together added 17.5 points to the average. It was the Dow's largest gain since Aug. 1.

Among broader market indexes, the Standard & Poor's 500 index rose 2.20, to 464.51, driven by electrical equipment, tobacco, financial, telephone and machinery stocks.

The Nasdaq composite index advanced 5.69, to 747.98, helped by rising prices for MCI Communications Corp., Microsoft Corp., Intel Corp., Novell Inc. and LDDS Communications Inc. It was Nasdaq's highest close since April 11.

Deere & Co. vaulted $3.50 to $69.50, boosting other farm machinery and construction equipment makers. Caterpillar Inc. rose $4.375, to $111.625; Agco Corp. spurted $1.625, to $45.25; and Clark Equipment Co. gained $1.875, to $68.50.

Morgan Stanley's index of stocks sensitive to swings in the economy rose 2.39, to 300.44. Its index of consumer goods stocks added 0.33, to 202.32.

Deere and Caterpillar gave "a little more interest to the cyclical side of the economy," said Neil Yarhouse, a fund manager at Aetna Life Insurance & Annuity Co., which manages almost $6 billion in stocks.

Deere said earnings soared 74 percent in the quarter that ended July 31, to $157.7 million, or $1.82 a share, from $90.8 million, or $1.19, a year ago. Analysts had forecast profits of $1.62 a share, according to Institutional Brokers Estimate System.

"We've been optimistic about Deere for some time, and optimistic about farm income and farmers' inclination to buy," said Thomas Henderson, who owns more than 900,000 Deere shares as manager of Lord, Abbett & Co.'s $4.1 billion Affiliated Fund.

Philip Morris jumped $1.25, to $56.50, its highest since March 7, on speculation that the maker of Marlboro cigarettes and Miller beer may either raise its quarterly dividend or announce a stock buyback at a board meeting on Aug. 31.

Moreover, the stock's dividend yield of 4.88 percent "is nothing to scoff at these days," said Jim Benning, a trader at BT Brokerage. The yield on the government's benchmark 30 1/4 -year bond ended at 7.54 percent yesterday, down from 7.55 percent Monday.

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