Market vaults to new highs Stocks are driven by profit optimism

February 23, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF Bloomberg Business News contributed to this article.

Stocks soared to new highs yesterday, as Wall Street became more optimistic that corporate profits will improve during the year and further interest rate cuts could be in store.

The Dow Jones industrial average marched to a record 5,608.46, up 92.49 points.

The Nasdaq composite index closed at a record 1,117.11, soaring above the 1,100-point mark for the first time in its history on a 20.26-point gain as trading topped 641 million shares, a Nasdaq record.

And the Dow Jones transportation average surpassed its 2,092.11 record set in December, rising 43.80 to 2,111.37.

The Standard & Poor's 500 index climbed 10.76 points to close at 658.86, but it fell shy of its record 661.45 set Feb. 12.

Some 1,768 stocks rose and 682 fell on the New York Stock Exchange, where 494 million shares traded hands, compared with the 377 million daily average volume.

"This bull market has been so awesome," said Ed Yardeni, chief economist at Deutsche Morgan Grenfell/C.J. Lawrence in New York, who believes the Dow could hit 10,000 by the turn of the century. "What happens is, nothing gets left behind. Everybody is looking for value, and every other day they look to see what has lagged behind and they rush back and buy them."

Indeed, gains in the stock market cut across all business segments, from technology to computers to transportation.

Among technology stocks, Intuit Inc. rose $4.75 to $68.25; America Online Inc. shares jumped $3.50 to $54.812; and Cisco Systems Inc. rose $2.125 to $49.312.

The Morgan Stanley high tech index surged 8.47, or 2.5 percent, to 353.94.

Computer companies also did well. Hewlett-Packard Co.'s stock reached a record $102.875 after gaining $4.50. Compaq Computer Corp. jumped $2 to $51.75 after the company's chief executive said it expects personal computer sales and profit increases of at least 20 percent, the magazine Boerse Online reported.

International Business Machines Corp. contributed most to the Dow's advance, climbing $3.875 to $124.125.

Among other Dow industrials, shares of Sears, Roebuck & Co. climbed $2.125 to $45.33 yesterday in the wake of its Wednesday announcement that it wants to shed its 50 percent stake in Prodigy Services Co. Sears, which has sought a buyer for the on-line service since December, could garner between $100 million and $500 million in the sale, analysts said.

Coca-Cola Co. rose $2.375 to $84.25 and Chevron Corp. added $1.875 to reach $58.25.

"First-quarter earnings are going to be better than we expect," said J. Richard Walton, chairman and chief investment officer at Axe-Houghton Associates in Rye Brook, N.Y., which manages $3.7 billion. While interest rates are falling, the economy is still chugging along at a fast enough pace to bolster earnings, he said.

Airline stocks cruised skyward. Delta shares rose $3.50 to $80, and UAL Corp., parent of United Airlines, jumped $6 to $188. Norfolk Southern Corp., a railroad, advanced $2.50 to $82.25.

The Dow battled back after it fell 44.79 points Tuesday, when Wall Street investors interpreted comments by Federal Reserve Board Chairman Alan Greenspan to mean that the central bank might stop cutting interest rates. Most industry experts were expecting the Fed to cut interest rates in March.

Market strategists are optimistic that the stock market's run will continue even after hitting new highs. "I'm pretty positive on the market overall," said David Straus, senior portfolio manager with J.L. Capital Management Inc. in Washington.

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