IBM leads surge in stocks as investors look to big companies

April 22, 1995|By Bloomberg Business News

NEW YORK -- U.S. stocks rose yesterday for a second day, led by International Business Machines Corp., as investors bet large, multinational companies will continue to post robust earnings.

"Earnings for the first quarter from the group are easily exceeding estimates," said Tinkham Veale, senior portfolio manager at Turner Investment Partners Inc., which manages $2.2 billion.

"And cyclical companies, whether they be chemicals, papers, Philip Morris, all are saying business remains favorable."

The Dow Jones industrial average rose 39.43, to 4,270.09, to reach its 19th record high this year. The gain put it up 1.47 percent for the week and 11.2 percent for the year. IBM, Minnesota Mining & Manufacturing Co. and United Technologies Corp., which generate about half of their sales abroad and are sensitive to swings in the economy, led the advance.

About 1,310 stocks advanced as 852 declined on the New York Stock Exchange.

Strong earnings this week from IBM and Eastman Kodak Co. supported investors' belief that profits made overseas will grow because of the dollar's slump against major currencies, traders said.

"Eastman Kodak and IBM have fulfilled earnings expectations and suggested there's more to follow," said Eric Miller, chief investment officer at Donaldson Lufkin & Jenrette. Among other large multinational companies that gained were Du Pont Co., Coca-Cola Co., Pepsico Inc., General Electric Co., Boeing Co. and Merck & Co.

Gains were also fueled by trades related to yesterday's so-called double-witching, the simultaneous expiration of index options and options on individual stocks that happens once a month, traders said. "There's a lot of 'buy' programs going on out there," said Patrick Davis, head of trading at Salomon Bros. Inc.

The steady dollar helped stocks as well, by easing concern that inflation will accelerate too quickly and prompt another interest rate increase.

Among broader market measures, the Standard & Poor's 500 index rose, adding 3.20, to 508.49. Electrical equipment, computer and food shares gained. The technology-laden Nasdaq composite index climbed 4.43, to 823.44, led by Apple Computer Inc., Bruno's Inc and St. Jude Medical Inc.

The Russell 2,000 index of small companies rose 1.26, to 262.51. The Wilshire 5,000 index soared 29.92, to 4,980.51.

Trading rose for the fifth straight day, to 406.2 million shares from 365.7 million, far above the roughly 320 million daily average over the past six months.

IBM's earnings led a rally in stocks for a second day, rising $2.625, to a new 52-week high of $91.625. On Thursday, the computer maker reported it earned three times what it earned last year in the first quarter.

Compaq Computer Corp. and Digital Equipment Corp. shares followed suit. Compaq Computer gained $1.125, to $36.875, after announcing a 11.3 percent increase in its earnings Thursday. Digital Equipment Corp. stock jumped $3.25, to $45, approaching its 52-week high of $46.125.

Apple also spurred technology shares, rising $1.50, to $39.125, after reports circulated that Canon Inc. and Apple continued to hold talks about Canon's buying a stake in the computer maker or finding a partner and buying all of it.

The computer maker also reported lower-than-expected fiscal second-quarter earnings because of increased expenses. Still, the earnings were well above last year's profits.

Other strong first-quarter earnings reports helped technology issues. Fusion Systems Corp., a maker of ultraviolet systems used in semiconductor manufacturing, posted strong earnings yesterday, sending its shares up $1.25, to $28.75.

Boeing shares gained after the company said Thursday night that United Airlines ordered six aircraft for $570 million to be delivered in the spring and summer of 1996. Analysts say that could also help United Technologies, which Thursday received a $118.7 million order from the Air Force for aircraft engines.

Also, French state-owned airline Air France warned Airbus Industries yesterday it will have to lower its aircraft prices or "there will be good news for [Boeing] to announce." Boeing shares rose 87.5 cents, to $55.75. United Technologies climbed $1.625, to $72.75.

Drug companies helped stocks move higher after Bristol-Myers Squibb Co. and Scherling-Plough Corp. beat Wall Street expectations, and Warner-Lambert Co.'s first-quarter profit increase matched analysts' estimates. Bristol-Myers shares added $1.375, to $64.875. Warner-Lambert was up $1, to $80.

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