Dow gains 5.39 as early rally fizzles

January 11, 1995|By Bloomberg Business News

NEW YORK -- U.S. stocks rose yesterday as record earnings from Motorola Inc. buoyed technology shares amid expectations that strong fourth-quarter profits will extend into 1995.

The gains faded late in the day after Johnson Redbook Service released a report showing that retail sales got off to a brisk start in the new year. The report, coming one day before the release of the Consumer Price Index, rekindled concern that inflation will pick up and lead to higher interest rates.

"Technology is doing really well today because Motorola's earnings were extremely good," said Patricia Chadwick, managing director and head of equity strategy at the $28-billion Chancellor Capital Management.

Motorola shares jumped to an all-time high of $63, adjusted for stock splits, before closing at $61.75, up $2.875. They led the rise in the Standard & Poor's 500 index.

The Dow Jones industrial average closed up 5.39, at 3,866.74, after soaring as much as 37.35. Two rounds of computer-guided "sell" orders pruned the advance starting about 3:15 p.m. EST, according to Birinyi Associates Inc. in Greenwich, Conn. International Business Machines Corp., Sears, Roebuck & Co. and Procter & Gamble Co. led the rise in the industrials.

The broader S&P 500 index rose 0.85, to 461.68, after jumping as much as 3.76. Semiconductor, computer hardware and software makers paced the gains. Auto, beverages and oil services shares declined the most.

The Nasdaq composite index gained 4.43, to 756.52, after rising as much as 7.13. Microsoft Corp., Intel Corp., Tele-Communications Inc. and Apple Computer Inc. led the advance.

Declining stocks equaled advancers on the New York Stock Exchange. Trading was the busiest so far this year, with about 351 million shares changing hands on the Big Board.

Even as a report showing producer prices rose just 0.2 percent in December buoyed stocks earlier yesterday, "some people want to flatten out positions in front of the CPI," said Barry Berman, head trader at Robert W. Baird & Associates Inc.

Motorola's fourth-quarter net income rose 51 percent, beating Wall Street estimates of about 20 percent. Sales and orders in all its divisions, including semiconductors, cellular phones and pagers, grew in the latest quarter.

Motorola is viewed as a barometer of demand in high technology because it makes chips used in applications ranging from computers to automobiles, besides making products of its own that use semiconductors.

Makers of semiconductors, computers and chip-production equipment rose on the heels of Motorola's earnings. "A lot of 'tech' names are piggybacking on that," said Jeffrey Rubin, analyst at Birinyi.

Among chip makers, Intel gained 62.5 cents, to $66.625; Texas ** Instruments leapt $3.625, to $75.25; LSI Logic Corp. climbed $1.625, to $41.875; National Semiconductor Corp. advanced 25 cents, to $19.875; and AMD rose 25 cents, to $29.125.

Chip stocks also gained on anticipation of the Semiconductor Industry Association's monthly report on demand. After the market closed, the SIA said its book-to-bill ratio rose to 1.05 in December, exceeding analysts' estimates and indicating that chip makers got $105 worth of new orders for every $100 worth of product shipped during the month.

Among PC makers, IBM rose $1.125, to $76.625, and Apple Computer Inc. gained $2.48, to $43.6875. The companies jointly developed the PowerPC chip with Motorola. Compaq Computer Corp. gained $1.50, to $41.25; and Digital Equipment Corp. rose 75 cents, to $35.375.

Stocks were bolstered yesterday by signs that inflation is tame, reducing pressure on the Fed to raise rates. The Labor Department said the producer price index rose 0.2 percent in December, both with and without food and energy.

But signs that Mexico's currency crisis isn't close to abating blunted the market's rally, some traders said. Investors shunned dollar-indexed tesobono bonds at the Mexican government's weekly sale yesterday, and concerted efforts to buy pesos have failed to bolster the currency. Mexican stocks tumbled 6.3 percent, and the Brazilian and Argentine stock markets plunged almost 10 percent each.

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