Stocks rise as mergers, takeovers continue Dow industrials climb 29 points

Nasdaq hits new high

April 23, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks rose yesterday as more than $26 billion of mergers and acquisitions showed that companies are taking steps to keep profits growing. The Nasdaq composite index reached its third straight record.

The merger of Bell Atlantic Corp. and Nynex Corp., and Cisco Systems Inc.'s purchase of Stratacom Inc., come amid a record year for acquisitions and suggested to some investors that many stocks still have room to rise.

The Dow Jones industrial average gained 29.26 to 5564.74. The 30-stock average triggered the New York Stock Exchange limits on stock-index arbitrage trading just 13 minutes after markets opened by rising as much as 52.74, then lost momentum.

The Nasdaq composite index climbed 14.80, to 1153.50, its 14th record this year. So far this year, the index is ahead 9.63 percent, the best among major U.S. stock market averages. Intel Corp., Microsoft Corp., Oracle Corp. and Stratacom contributed most to the Nasdaq advance.

Boosted by software, computer, telephone, soft-drink and electrical equipment stocks, the Standard & Poor's 500 index gained 2.82, to 647.89.

Advancing stocks outnumbered decliners by more than 14 to 9 on the Big Board, on volume of 395.4 million shares. The Russell 2000 index of small-company shares climbed 2.48, to 340.99, its third consecutive record, and the Wilshire 5000 index rose 33.2, to 6425.8.

Stocks also benefited from lower bond yields. The market's gains would have been larger if not for a late slide in drug manufacturers on concern that a strengthening dollar would crimp profits earned overseas.

The $4 billion purchase of Stratacom by Cisco Systems boosted computer stocks by suggesting that many remain undervalued.

Cascade Communications Corp., a Stratacom rival that Cisco was interested in buying last year, yesterday unveiled its own acquisition, buying closely held Arris Networks Inc. for $145 million. Cascade climbed $1.50, to $86.50.

Other computer-related shares climbed. Hewlett-Packard Co. rose $1.625, to $101.25; Microsoft rallied $3, to $112.75; International Business Machines Corp. rose $1.875, to $107.25; and Intel added $2.50, to $67.75.

CUC International Inc., a membership services company, agreed buy Ideon Group Inc., a credit-card protection company, for $375 million in stock. CUC shares eased 37 1/2 cents, to $30.75, and Ideon rose 87 1/2 cents, to $13.125.

Lone Star Industries Inc., a cement and concrete producer, rose $2.50, to $34.50. The Connecticut-based company said several companies were interested in a possible takeover or merger.

Westcott Communications Inc. climbed $1.6875, to $21.125. K-III Communications Corp. said it will buy Westcott for $422 million, or $21.50 a share.

U.S. mergers and acquisitions so far this year total $172 billion, a record for the first 3 1/2 months.

Lower yields on U.S. Treasury bonds increased the attractiveness of stocks relative to bonds. Yields on the benchmark 30-year bond, which moves in the opposite direction of its price, fell 4 basis points to 6.75 percent, the lowest since April 4.

Falling rates brighten the outlook for corporate profits, by lowering companies' financing costs and making it less costly for consumers to borrow.

Encouraging to many investors yesterday were earnings reports from dozens of companies, including General Motors Corp., Mobil Corp., Chevron Corp., Exxon Corp., Texaco Inc. and Amoco Corp., that came in with first-quarter profits that were better than analysts expected, although in some cases earnings fell from a year ago.

Prices were mixed on overseas stock markets. Germany's DAX index rose 0.37 percent; Britain's FT-SE 100 index fell 0.11 percent; and Spain's IBEX index jumped 0.79 percent to a record 4070.34. Japan's Nikkei 225 index rose 1.10 percent.

Pub Date: 4/23/96

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