Stocks rise 14 points after Fed cuts rates Dow industrial average up 5.4% for January, much more than a year ago

February 01, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks reached records again yesterday after the Federal Reserve Board lowered interest rates for the third time since July.

The widely anticipated cut means that the economy can be expected to grow for a sixth straight year, giving corporate profits room to expand.

The 30-stock Dow Jones industrial average rose 14.09, to 5,395.30 after briefly rising to 5,408.67, its first foray above 5,400. United Technologies Corp., Exxon Corp. and General Electric Co. paced the advance.

It was the Dow industrials' sixth record in eight days, and helped them post a 5.44 percent increase for the month, dwarfing last January's 0.25 percent gain, which kicked off the stock market's best year since 1975. In the past two weeks alone, the Dow industrials have soared 351.52 points, or 7 percent, as investors bet that lower interest rates would keep the economy humming and boost corporate profits.

In the broad market, the Standard & Poor's 500 index, representing 70 percent of the U.S. stock market's capitalization, gained 5.87, to a record 636.02, and the Nasdaq composite index gained 8.49, to 1,059.79, near its record 1,069.79 set Dec. 4.

Nearly two stocks rose for every one that fell on the New York Stock Exchange, where volume grew to 472.1 million shares.

The Russell 2,000 index of small-company stocks advanced 2.00, to 315.38; the Wilshire 5,000 index climbed 50.18, to a record 6,211.82; and the American Stock Exchange market value index added 3.14, to a record 554.1.

Stocks of credit-card issuers and consumer lenders climbed on expectations that fewer consumers will default on their debt if rates are declining. MBNA Corp. rose $2, to $40.75; Household DTC International Inc. climbed $2.25, to $64.875; Advanta Corp. spurted $3, to $44; and American Express rose $1.125, to $46.

Mortgage lenders gained amid optimism that lower rates make buying a new, or larger, home more affordable. North American Mortgage Co. surged $2, to $26.25.

American International Group and other insurance stocks rallied. AIG climbed $3.875, to $96.875; AON Corp. rose $1, to $54.375; and Loews Corp. jumped $2.875, to $82.625.

Transportation companies climbed on a belief that swifter economic growth will spur the shipment of more goods.

Federal Express Corp. vaulted $5.625, to $76.125, and UAL Corp., parent of United Airlines, rose $2.375, to $161. The Dow Jones transportation average leaped 41.88, to 1,951.55.

Expectations of increasing orders at major companies such as United Technologies Corp., a string of mergers and acquisitions and expectations of cheaper money contributed to the advance.

United Technologies climbed 1.875, to a record 102.625. The maker of Pratt & Whitney jet engines benefited from U.S. Export-Import Bank financing approval for $850 million worth of engine sales to Russia.

Software stocks got an early lift from International Business Machines Corp.'s $743 million purchase of Tivoli Systems Inc.

Microsoft Corp. rose $1.6875, to $92.50; Automatic Data Processing Inc. gained 87.5 cents, to $39.875. Novell Inc., which agreed to sell programs including WordPerfect to Corel Corp. for $190 million, climbed $1, to $13.50.

Corning Inc. rose 75 cents, to $31.25. The glass maker is in talks to sell its clinical laboratory services business, possibly to SmithKline Beecham PLC. SmithKline American Depositary Receipts rose 75 cents, to $56.25.

Tobacco stocks tumbled in the last hour of trading as a Florida court upheld the class-action status of a liability suit against cigarette makers.

Major overseas stock markets were higher. Japan's Nikkei 225 index surged 0.44 percent to a 17-month high. British stocks gained 0.64 percent, measured by the benchmark FT-SE 100 index, and Germany's DAX index rallied 1.41 percent to an all-time high.

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