Stocks rise on expected gains overseas

April 04, 1995|By Bloomberg Business News

NEW YORK -- U.S. stocks, led by multinational companies, closed up yesterday amid confidence a weak dollar will translate into higher earnings.

Gains came in stocks such as Walt Disney Co., Coca-Cola Co., Philip Morris Cos. and International Business Machines Corp., all of which have large sales overseas.

"As long as the dollar continues to cheapen, which it looks like it's going to continue to do, these companies are probably the place to be," said James Engle, chief investment officer at $2.5 billion Wood, Struthers & Winthrop Management.

"The blue chips have led because they look like a safe haven in a slowing economy," Mr. Engle said. "A lot of investors who had invested overseas directly are coming to the view that the blue chips are the safest way to get international exposure."

Meanwhile, a $2.3 billion takeover offer for E-Systems Inc. by Raytheon Co. encouraged some investors to believe further consolidation is in store for the defense industry.

The Dow Jones industrial average, which reached a record 4,172.56 Thursday, gained 10.72, to 4,168.41. Disney, Coke, Philip Morris and IBM rose a point or more, overshadowing equal-size losses in Chevron Corp., Eastman Kodak Co. and Boeing Co. Disney makes 23.5 percent of its sales overseas, Coke 67 percent, Philip Morris 44 percent and IBM 53 percent.

Stocks also got a boost as yields on 30-year U.S. Treasury bonds dropped to 7.38 percent from 7.43 percent Friday. Lower interest rates ease companies' and consumers' borrowing costs and make stocks more attractive compared to bonds.

The Standard & Poor's 500 stock index rose 1.14, to 501.85, helped by rising drug, soft-drink, semiconductor, telephone and retail shares.

Advancing stocks matched decliners, 1,129 to 1,088, on the New York Stock Exchange. The Nasdaq composite index rose 0.84, to 818.05, after first sinking as much as 4.96. Intel Corp., Cisco Systems Inc., Oracle Systems Corp., Bay Networks Inc. and Stratacom Inc. fueled the recovery.

The Russell 2,000 index of small-company stocks added 0.04, to 260.81, after falling as much as 1.15, and the Wilshire 5,000 index rose 6.78, to 4,927.2.

Investors' emphasis on companies with large operations abroad reflects questions about the strength of the U.S. economy and corporate profits, traders said.

"It's been the high-capitalization, large stocks that have led the market," said Timothy Heekin at Salomon Bros. "Investors have gotten burned in derivatives, Latin America, currencies. They want to be in very safe, liquid stocks they can move into and out of easily."

The 30-stock Morgan Stanley consumer index of makers or suppliers of consumer goods rose 1.0, to 231.5, while the 30-stock index of companies whose fortunes are closely tied to swings in the economy dipped 0.73, to 306.98.

Stocks surged in the first quarter as investors foresaw an economic "soft landing," said Don Hays, director of investment strategy at Wheat First Butcher Singer in Richmond, Va. An economic slowdown that keeps interest rates under control helps both corporate profits and stock prices, he said.

In the first quarter, stocks registered their biggest gain since the first three months of 1991. The S&P 500 jumped 9.02 percent, the Nasdaq composite climbed 8.68 percent and the Dow industrials gained 8.43 percent.

Further evidence that the economy may be slowing was contained in a National Association of Purchasing Management survey yesterday that said manufacturing activity grew for a 19th straight month in March, but at a much slower pace than in February.

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