Optimism over rates lifts Dow 54 points Speculation on takeover of American Express paces blue chip advance


NEW YORK -- U.S. stocks surged yesterday as falling bond yields renewed optimism that profits have room to expand. American Express Co. paced the advance amid speculation it could be a takeover target.

Helping the outlook for stocks were expectations that the Federal Reserve will trim interest rates when it meets next week. Better-than-expected earnings from Alaska Air Group Inc. and Hershey Foods Corp. reassured investors that profit growth remains strong even as economic growth moderates.

The Dow Jones industrial average rose 54.92, to 5,271.75, an all-time high and its third record this week. The gain, which erased all of yesterday's 26.01-point drop, pushed the 30-stock average's advance during the past seven trading sessions to 4.04 percent, its best since August 1994.

Shares of American Express rallied $2.625 to $43.375 and contributed almost seven points to the Dow industrials' advance. Business Week reported the financial and travel services provider could be a takeover target at $60 a share.

Treasury bond yields fell. The yield on the benchmark 30-year Treasury bond dropped to 6.04 percent after rising as high as 6.18 percent earlier.

In the broad market, the Standard & Poor's 500 index rose 4.59 to 621.62, just below its Dec. 13 record of 621.69. The advance was fueled by gains in drug, oil, health-care and financial shares.

The Nasdaq composite index rose 5.01 to 1,040.96, led by Oracle Corp., Bay Networks Inc. and Microsoft Corp.

Some six stocks rose for every five stocks that fell on the New York Stock Exchange, where 385.7 million shares changed hands, about average for the past three months.

Among broad market indexes, the Russell 2,000 index of small capitalization stocks rose 0.66 to 311.22; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, rose 41.47 to 6085.13; the American Stock Exchange market value index gained 3.60 to 545.24; and the S&P 400 midcap index gained 0.90 to 216.57.

Drug stocks gained a day after Schering-Plough Corp. said fourth-quarter profit rose a larger-than-expected 13 percent.

lTC Also feeding the gains was a wave of new money flowing into stock mutual funds.

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