Late technology rally spurs stocks

October 28, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks posted an across-the-board advance yesterday for the first time in eight days, powered by a late rally in technology companies and small advances in the dollar and Treasury bonds.

Gains would probably have been larger if not for concern that today's initial estimate of the third-quarter gross domestic product will show rapid growth, prompting further rises in interest rates, traders said.

Computer and semiconductor stocks "will look like an attractive group in the fourth quarter and into the first quarter of next year, whether you have higher interest rates or not," said David Butler, head of equity trading at Kemper Financial Services in Chicago.

Apart from technology stocks, chemical issues such as Hercules Inc. and Du Pont Co., oil companies such as Texaco Inc., #F together with interest-rate-sensitive money-center bank and telephone stocks, helped push up the market.

The Dow Jones industrial average closed at its high for the day, jumping 26.92, or 0.7 percent, to 3,875.15, led by Eastman Kodak Co., Merck & Co. and American Express Co.

Among broader market measures, the Standard & Poor's 500 index added 3.23, or 0.7 percent, to 465.84. The Nasdaq combined composite index advanced 4.23, or 0.55 percent, to 767.47, fueled by gains in Microsoft Corp., Cisco Systems Inc., Intel Corp., Nordstrom Inc. and Applied Materials Inc.

More than four stocks rose in price for every three that fell on the New York Stock Exchange. About 328 million shares changed hands.

Technology stocks, including Applied Materials and Hewlett-Packard Co., surged as Merrill Lynch & Co. raised its investment opinion on

both Texas Instruments Inc. and Adaptec Inc. to "above average" from "neutral."

Texas Instruments is seeing "stronger-than-expected demand" for dynamic random-access memory chips, while Adaptec is benefiting from growing adoption of the company's products in personal computers, Merrill analyst Thomas Kurlak said.

Texas Instruments surged $2.375, to $73.75; Hewlett-Packard spurted $1.625, to $95.875, a 52-week high; Applied Materials jumped $1.50, to $51; Micron Technology Inc. added $1, to $39.375; Advanced Micro Devices Inc. rose $1.375, to $25.875; and Integrated Device Technology Inc. leaped $1.125, to $28.

Stocks also gained as the dollar rose 0.79 pfennig, to 1.4988 German marks; 0.17 Japanese yen, to 96.998 yen, and as the Treasury's benchmark 30-year Treasury bond rose 3/16-point to yield 8.04 percent, down from 8.07 percent Wednesday. A rising dollar makes U.S. assets such as stocks and bonds more attractive to overseas investors.

Strong earnings boosted segments of the market, including chemicals, analysts said. There's been "some further follow-through [buying] on the good earnings reports we continue to see," said James Solloway, director of research at Argus Research.

Hercules Inc. soared $6.375, to $106.875. The chemicals producer earned $1.65 per share in the third quarter, up from $1.21 per share a year earlier, and topping analysts' estimate of $1.46 per share profit.

Dow Chemical Co. added 50 cents, to $73.625, after it said

earnings more than doubled to $1.04 a share, from 50 cents in the year-earlier period. Analysts had forecast earnings of just 80 cents a share.

Some traders mistrusted yesterday's move. "The GDP report tomorrow may or may not reinforce the Federal Reserve's desire to tighten" credit by further raising interest rates, said Joseph DeMarco, head of equity trading at HSBC Asset Management, a unit of Hong Kong & Shanghai Bank.

The main obstacle in the way of higher prices remains interest rates, analysts said. "It's hard to get [the Dow industrials] up above 4,000 with rates above 8 percent," said Anthony Conroy, managing director for equities at Mabon Securities Corp.

And today's GDP report might send interest rates still higher. "People have been cautious," said Mr. Solloway of Argus Research. "If we see a [GDP] growth rate that is at or above 3 percent, it could very well cause further consternation in the bond market, which would tend to drag stocks down."

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