Stocks ride Internet to a record

November 04, 1995|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks rose yesterday for a third day, pushing the Dow Jones industrial average to its second straight record high, as shares of computer and economically sensitive companies gained.

Sun Microsystems, Cisco Systems and other companies that make computer networks used for the Internet surged as investors bet they would profit the most from the on-line computer craze.

Philip Morris Cos. broke the record price of $86.625 it set three years ago and helped the Dow industrials spurt 16.98, to 4,825.57, its 52nd record this year. The 30-stock average is up 1.8 percent for the week -- the biggest weekly gain in percentage terms since July 7.

Economically sensitive companies rose, including Minnesota Mining & Manufacturing Co., International Business Machines Corp., Aluminum Co. of America and Chevron Corp.

The Morgan Stanley cyclical index of 30 stocks reached 336.6, its highest level in a month.

The Standard & Poor's 500-stock index closed 8 points away from its Oct. 19 record. The index, which represents 74 percent of the value of all U.S. stocks, rose 0.85, to 590.57. Prices for computer systems, tobacco and semiconductors gained, while telephone, regional bank and health-care issues slipped.

Nasdaq's technology-laden composite index jumped 8.34, to 1,065.66, approaching its all-time high of 1,067.40 set Sept. 13. Cisco Systems Inc., Sun Microsystems Inc. and Applied Materials Inc. fueled the climb.

Computer network stocks stole the scene from Internet software makers yesterday.

The Wall Street Journal, quoting analysts, said companies that make the computer equipment for on-line services are better investments than are Internet software companies just beginning make money.

The Interactive Week Internet index jumped 2.2 percent, to a high of 238.12, yesterday as such companies as Netscape Communications Corp. that make software to navigate the Internet jumped at least 8 percent. Thursday, communications equipment shares helped push the index up 3.3 percent to an all-time high of 246.03.

Among network companies that rose, Cisco Systems jumped $3, to $84.25, and Silicon Graphics Inc.'s stock rose $4, to $36.25, its highest level in three weeks. Sun Microsystems sprinted $5.46875, to $84.359. It announced a 2-for-1 stock split and is expected to unveil new products next week.

Computer-related stocks are picking up steam as investors anticipate that the Federal Reserve will cut interest rates to boost economic growth, money managers said. Technology stocks were the engines behind the market rally this year, and could propel further gains.

EMC Corp.'s stock jumped 11 percent, to $18.50, and was the most actively traded on U.S. exchanges after the company signed agreements with Hewlett-Packard Co. and AT&T Corp. to supply storage devices for computers linked to computer networks.

Financial stocks slipped as concern grew that more consumers will default on their loans and squelch the companies' profits. The S&P Major Regional Bank Index fell 2.17, or 1 percent, to 228.67, after peaking two weeks ago at 243.72.

Among banks that slipped, NationsBank Corp. fell $1, to $67.50, and Wells Fargo & Co. dropped $3.625, to $212.25.

Speculation that the Federal Reserve will trim borrowing rates for a second time this year mounted during the week as a slew of economic reports showed that the economy is easing and inflation isn't accelerating. The prospect that the U.S. government will balance the country's budget also points to lower rates in the future, money managers said.

Lower rates are better for stocks because they make them more attractive relative to bonds.

"Economic growth is not dead, but it's not really alive; so it gives the Fed room to ease," Shawmut's Tasho said. He said economically sensitive steel, paper and auto companies that slumped as the economy slowed may be the best buys now.

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