Automakers pace rally Dow adds 19

January 05, 1995|By Bloomberg Business News

NEW YORK -- U.S. stocks climbed yesterday as a rally in automakers overshadowed losses in beverage, gold and household products shares.

Autos, along with tobacco and chemical companies, advanced amid expectations of profit increases in the fourth quarter of 1994 and first quarter of 1995.

"It's all the big-cap stocks that are gaining," said Kenneth Ducey, head trader at BT Brokerage Inc. "People are optimistic about earnings and the economy for the first half."

The Dow Jones industrial average climbed for the third straight day, adding 19.17, to 3,857.65. Gains in General Motors Corp., Union Carbide Corp., and Philip Morris Cos. countered losses in Coca-Cola Co. and Procter & Gamble Co.

The rally in autos was sparked by optimism about December vehicle sales, which were released yesterday. Also, Chrysler Corp.'s Chairman Robert Eaton told reporters at the industry's trade show in Detroit that 1994 was the best year ever for the nation's third-largest automaker. And David Garrity, a Smith Barney Inc. analyst, raised his earnings estimates for GM earlier yesterday.

General Motors Corp. went up $1.50, to $43.25; Ford Motor Co. rose 75 cents, to $28.625; and Chrysler gained $1.875, to $50.875.

Chemical stocks were another bright spot. Dow Chemical Co. jumped $2, to $68.375, after Salomon Bros. Inc. analyst John Willard raised his rating on confidence that higher chemical prices will translate into earnings growth of 75 percent this year.

Union Carbide rose $1.50, to $29.50. Company insiders bought a combined 6,500 shares in the Dow industrials' best performer in 1994 for the first time in years, the Wall Street Journal reported.

Philip Morris climbed $1.25, to $58.875, after the tobacco and food company said it plans to combine its North American food operations, Kraft and General Foods. The move will eliminate duplicate jobs and bolster growth, said Allan Kaplan, an analyst at Merrill Lynch & Co.

The Standard & Poor's 500 index gained 1.60, to 460.71, after easing 0.16 Tuesday. Beverage shares, which climbed as much as 11 percent in the fourth quarter, led the decline.

"There's still fear about the Latin American situation, and PepsiCo has spilled over into the rest of the consumer sector," said Richard Ciardullo, senior vice president at Liberty Investment Management, which invests about $4.3 billion for institutions.

PepsiCo Inc. fell after an analyst at Donaldson, Lufkin & Jenrette Securities Corp. lowered his rating and earnings estimates for the soda maker on concern that the Mexican peso's collapse could reduce its profits.

PepsiCo fell 75 cents, to $35.25. About 8 percent of the company's earnings come from Mexico, which is viewed as an important source of growth for U.S. consumer-products companies.

Gold shares fell as gold prices dropped to a nine-month low amid expectations that rising interest rates will curb inflation.

Newmont Mining Corp. dropped $1.625, to $33.625; Placer Dome Inc. went down $1, to $19.75; and American Barrick Resources Corp. fell 87.5 cents, to $20.50.

The Nasdaq combined composite index added 2.26 to 745.84, recouping part of yesterday's 8.38-point slump. Microsoft Corp., MCI Communications Corp. and Bay Networks Inc. were the biggest advancers.

Stocks were also buoyed by a drop in Treasury bond yields and a stronger dollar, both of which were interpreted as signs that inflation is under control and that the Fed can be less aggressive in raising rates.

The yield on the Treasury's benchmark 30-year bond fell to 7.85 percent, from 7.92 percent Tuesday. Bonds were buoyed by a rising dollar, which rose to a four-month high against the yen, of 101.46 yen.

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