Optimistic outlook helps lift stocks

November 17, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks rose yesterday for the second time in three days amid optimism that the economy won't slow enough to hurt corporate profits. Oil issues led the advance.

"Profits are really strong, and stock prices follow earnings," said Elizabeth Bramwell, president of Bramwell Capital Management, which manages about $80 million. The Federal Reserve's six interest rate increases this year "aren't enough to derail the economy."

The Dow Jones industrial average, which had been down as much as 6.05 points, gained 18.84, to 3,845.20, adding most of the gain in the last 15 minutes of trading. It was the highest close since 3,845.88 on Nov. 3. Shares of Eastman Kodak Co., Boeing Co., Procter & Gamble Co. and United Technologies Corp. rose the most.

Shares of Boeing rose $1.375, to $45.125, adding about 3.7 points to the industrial average, after the company said it was in discussions with China on participating in the "Asia Airbus" project by making small jets for the region's rapidly growing aviation market.

Among broader market indexes, the Standard & Poor's 500 index rose 0.59, to 465.62, recapturing about half Tuesday's 1.01-point decline. Shares of oil, beverage, drug and auto issues rose most, while telephone, banking and financial stocks slipped.

The rise in auto issues was led by Chrysler Corp., which rallied $1.125, to $51. Some analysts said higher interest rates haven't slowed the industry's growth prospects.

"Despite the retarding effect of rising interest rates on demand for cars, we still look for industry sales to remain strong in 1995 and 1996," said David Healy, analyst at S. G. Warburg. The S&P auto index, up as much as 3.28, closed at 208.99, up 2.62. General Motors Corp. gained 62.5 cents, to $39.625, and Ford Motor Co. was unchanged, at $28.75, after being up as much as 37.5 cents.

Oil stocks advanced as investors and analysts speculated that oil prices may be nearing a low. Crude oil for December delivery has fallen about $1.56 a barrel, or about 8.2 percent, to $17.37, where it closed yesterday.

"There's probably some prognostication developing that oil prices are going to work higher in the medium term and we are through the worst of the decline," said George Gaspar, an oil analyst at Robert W. Baird & Co.

He also said that investors are attracted to the dividends on oil stocks and that inflation tends to benefit oil companies by enabling them to raise prices. The dividend yield on the S&P international oil index is currently 4.41 percent, compared with 2.74 percent for the S&P 500.

The Nasdaq composite index rose 0.62, to 769.64, its third straight gain. Advancing shares of Tele-Communications Inc., Cisco Systems Inc. and U S Healthcare Inc. were partly offset by losses in Intel Corp., Cracker Barrel Old Country Store Inc. and LDDS Communications Inc.

About five stocks fell for every four that rose on the New York Stock Exchange, where about 297 million shares traded hands.

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