U.S. stocks, bonds gain for first time in 4 days

WALL STREET

October 08, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks snapped a four-day slide yesterday as oil stocks rallied amid tensions in the Middle East and International Business Machines Corp. climbed to a two-year high.

U.S. bonds also rallied for the first time in four days after the September jobs report eased concern about inflation, rebounding from a dip that pushed yields to 8 percent for the first time in more than two years.

The Labor Department's report wasn't strong enough to prompt an immediate rise in interest rates by the Federal Reserve, although many still expect rates to rise for a sixth time this year within a few weeks.

"You didn't have any Fed action" in response to the employment report, and that was positive for stocks, said David Butler, head of trading at Kemper Financial Services in Chicago.

Treasury bond prices fell immediately after the report was released, then recovered. The yield ended at 7.91 percent, down from 7.96 percent Thursday.

The Dow Jones industrial average rose 21.87, or 0.58 percent, to 3,797.43, fueled by gains in IBM, Exxon Corp., Aluminum Co. of America, Texaco Inc. and Chevron Corp. Over the week, the Dow industrials fell 45.76 points, or 1.2 percent.

Among broader market measures, the Standard & Poor's 500 index rose 2.74, to or 0.61 percent to 455.1, paced by international and domestic oil companies, telephone, computer and semiconductor stocks. The Nasdaq combined composite index gained 5.77, or 0.78 percent, to 749.96, boosted by gains in Nordstrom Inc., Intel Corp., Biogen Inc, U.S. Healthcare Inc. and Cisco Systems Inc.

The Russell 2000 Index of small stocks rose 1.18, to 250.71, while the Wilshire 5000 Index climbed 24.78, to 4,526.47.

More than 11 stocks rose for every 10 that fell on the New York Stock Exchange.

Oil stocks surged in the wake of reports that Iraqi troops were moving toward Kuwait and President Clinton had sent an aircraft carrier to the Persian Gulf. Texas crude oil for delivery next month rose as much as 45 cents, to $18.70 a barrel, before closing at $18.26, up 1 cent.

In a related move, Oppenheimer & Co. analyst Paul Ting raised his investment opinion on oil stocks, saying the United Nations is likely to announce a stringent program to monitor weapons in Iraq next week. That makes it less likely Iraq will be allowed to export oil on world markets, curbing supplies, he said.

British Petroleum PLC American depositary receipts, each representing 12 ordinary shares, rose $1.375, to $79; Mobil Corp. added $1.375, to $79.375; Amerada Hess Corp. gained $2.50, to $48.25; Exxon advanced $1.50, to $58.625; Chevron increased $1, to $42.25; Amoco rose 87.5 cents, to $58.875; and Texaco Inc. rose $1.125, to $61.125.

Stocks also got a boost from IBM, up $2.375, to $71.125, the highest since October 1992. IBM told the Wall Street Journal its recently introduced Aptiva personal computer line was meeting strong demand and had sold out through the end of the year.

"That's a great positive for them," said Susan Marker, head trader at Janney Montgomery Scott in Philadelphia.

Last July, IBM reported unexpectedly strong second-quarter earnings of $1.14 a share, up from a loss of 8 cents a year before. Third-quarter profits are forecast to rise to 92 cents from a loss of 12 cents a year ago.

Biogen jumped $5.50, to $54.75, and Chiron Corp. fell $1.375, to $60. On Monday, Biogen will present results of a trial of its beta-interferon drug in multiple sclerosis patients at an American Neurological Association meeting in San Francisco. Positive results in slowing the progression of the disease would give Biogen's product an advantage over Chiron's BetaSeron drug.

Stocks have fallen for three straight weeks, with the Dow Jones industrial average losing 4 percent of its value.

Kemper's Mr. Butler said chances are good stocks will continue to gain early next week before declining in advance of the release of September's producer price report next Thursday and the consumer inflation index next Friday.

Before the employment report was released, traders were concerned it might prompt the Fed to boost interest rates as early as next week to slow the economy and subdue inflation.

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