Stocks surge to another new high GM earnings surprise helps fuel 76-point rise in Dow industrials

January 31, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks rallied to records yesterday, fed by unexpectedly strong earnings from General Motors Corp. and the prospect of lower interest rates. The Dow Jones industrial average posted its biggest gain in eight months.

GM's report buttressed three weeks of better-than-expected profits from many of the country's leading companies, spurring optimism that profit growth will keep expanding this year.

The Dow industrials surged 76.23, to 5,381.21, their fifth high in seven days. The last time the 30-stock average gained as much in percentage terms was May 31, when it shot up 1.98 percent on a bet that the economy was on the brink of recovery.

Shares of economic bellwethers Union Carbide Corp., Aluminum of America and GM paced the Dow industrials' advance. The gains came as investors bet that the Federal Reserve's policy committee will trim borrowing rates today to juice up the economy.

GM jumped $1.375, to $53.625 after it said fourth-quarter earnings rose to $1.98, beating analysts' average estimate of $1.34. Earnings were helped by a lower tax rate, which tumbled to 11 percent, from 32.5 percent a year ago.

Union Carbide soared $3, to $42.75 and Alcoa jumped $2.25, to $56.25. Eastman Kodak Co. shares rose $1.75, to $72.875 after an analyst at Salomon Brothers Inc. told investors to buy shares of the company.

The Standard & Poor's 500 index added 5.93, to 630.15, its nTC second straight high. Drug, health care and chemical issues paced the advance.

The Nasdaq composite index climbed 8.80, to 1,051.30, still below its record 1,069.79 of Dec. 4. Amgen Inc. led the Nasdaq's advance after researchers said its infection-fighting drug Neupogen appears effective in prolonging the lives of AIDS patients. The stock rose $2.4375, to $61.3125.

Among other indexes, the Russell 2,000 index of small companies climbed 1.56, to 313.38; the American Stock Exchange market value index added 3.39, to reach 550.96; and the Wilshire 5,000 index soared 55.69, to a record 6,161.64.

About 1,648 stocks rose and 780 stocks fell yesterday on the New York Stock Exchange, and 464 million shares changed hands, far above the 363 million shares traded Monday and the recent daily average volume of 362 million.

A weak December retail sales report from the Commerce Department added to optimism that the Fed has room to lower rates, analysts said. Yields on benchmark 30-year Treasury bonds dropped to 6.04 percent, from 6.09 percent yesterday.

Of the 318 companies in the S&P 500 that have posted fourth-quarter earnings so far this year, 48.4 percent exceeded estimates and 37.4 percent fell below.

Sun Microsystems gained $1.4375, to $45.6875 yesterday after Reuters reported that merger talks with Apple Computer Inc. collapsed because the two companies could not agree on Apple's price. Apple skidded $1.8125, to $27.3125.

Wm. Wrigley Jr. Co. surged $2.125, to a record $57.25 after posting a 34 percent increase in profits.

Ben & Jerry's Homemade Inc., an ice cream company, jumped $1.625, to $15.50 and Estee Lauder, a cosmetics company, rose $3.25, to $37 after both beat Wall Street estimates.

Green Tree Financial Corp., a lender for consumer purchases of manufactured homes and boats, posted fourth-quarter earnings of 50 cents a share, above the year-earlier 34 cents and forecasts of 45 cents. Its shares rose 25 cents, to $28.875. The stock is up 23 percent in two weeks.

Drug shares extended Monday's gains amid expectations that the companies will continue to report robust profits. Rhone-Poulenc Rorer Inc., Merck & Co. and Pfizer Inc. led the advance.

Eli Lilly & Co., maker of anti-depression drug Prozac, rose $2.25, to $55.875 after announcing a 15 percent increase in its fourth-quarter net income.

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