Dow surges 55.51 on positive earnings reports

October 12, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks rallied for a third day yesterday, in the market's largest gain in a month, as Motorola Inc., Chrysler Corp. and PepsiCo Inc. reported better-than- expected earnings and interest rates fell.

Technology stocks surged as a semiconductor trade group said September chip orders topped shipments for the 10th straight month and Apple Computer Inc. said fiscal fourth-quarter earnings will surpass expectations. Separately, Procter & Gamble Co. touched an all-time high, saying it expects record sales and earnings in the latest quarter.

"You had several positive earnings announcements, particularly in the technology sector, and that helped relieve" concern that higher rates might slow profits, said George Wild, portfolio manager at Heartland Capital Management in Indianapolis. Investors are now "expecting great earnings."

The Dow Jones industrial average gained 55.51, or 1.45 percent, to 3,876.83, its highest in two weeks. Earlier, the average rose as much as 61.23 and triggered the New York Stock Exchange limits on computer-guided trading for the first time since August. Caterpillar Inc., General Electric Co. and AlliedSignal Inc. led the advance.

Stocks also got a lift from waning tensions in the Middle East, Wild said. Iraqi troops massed near the Kuwait began assembling for what appeared to be a withdrawal, the Pentagon said.

Among broad market measures, the Standard & Poor's 500 index climbed 6.76, or 1.47 percent to 465.80. Soft drink, electrical equipment, oil, auto, and software stocks posted large gains.

The Nasdaq combined composite index jumped 8.76, or 1.17 percent, to close at 765.57, after sprinting 6.85 Monday and 5.77 Friday. Microsoft Corp., Oracle Systems Corp., Novell Inc., Amgen Inc. and Tele-Communications Inc.

The Dow Jones utilities average climbed 1.45, to 181.32, a four-week high. More than two stocks rose for every one that fell on the New York Stock Exchange, where volume soared to 355.5 million shares from 213.1 million Monday.

Earnings this quarter are likely to grow by 14 percent to 20 percent for most stocks in the S&P 500 index, said Alan Ackerman, market analyst at Reich & Co.

Of 48 companies in the S&P 500 that have reported third-quarter earnings, 46 percent have been above analysts' expectations, 21 percent in line and 33 percent below.

Many of the largest earnings gains will come from technology stocks, traders said.

Investors are "starting to see some spillover effect into other related companies from one or two positive earnings situations," said David Butler, head of trading at Kemper Financial Services in Chicago.

Motorola climbed $1.25, to $54. The cellular telephone and semiconductor maker earned 65 cents a share in the latest quarter, up from 48 cents last year and better than analysts' 60-cents forecast.

Apple rose 75 cents, to $39.625, after reaching a 52-week high of $41.875. The PC maker said strong demand for its Power Macintosh and PowerBook notebook systems will translate into earnings a few cents above 90 cents a share in the quarter that ended Sept. 30, at least 38 percent above analysts' estimates.

The Semiconductor Industry Association said September chip shipments surged 31 percent from a year ago, while orders increased by 33 percent.

Continued demand for personal computers helped buoy the industry, said Erik Jansen, an analyst at Alex. Brown & Sons Inc.

Technology stocks "should stay strong, and that's always good for rallies" in the stock market, said Joseph DeMarco, managing director for equity trading at HSBC Asset Management, a unit of Hongkong & Shanghai Bank.

Proctor & Gamble Co. vaulted $2.50, to $62.375. The maker of Ivory soap and other household goods expects cost cutting and increased sales volumes to spur record earnings in the quarter that ended Sept. 30.

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