Stocks gain on reports hinting low inflation Bond yields decline, lifting bank shares

Dow rises 47 points

July 31, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks rose yesterday as reports of tame inflation drove bond yields lower, helping interest-rate-sensitive bank shares gain. Computer and semiconductor issues furthered the advance.

Stocks were buoyed by a report indicating that wages are not rising rapidly enough to drive prices of goods and services higher. Coupled with evidence that the housing market is not heating up and that retail sales are rising modestly, the report prompted investors to reassess expectations for higher interest rates.

The Dow Jones industrial average rose 47.34 to 5,481.93, gaining all those points in the last two hours of trading. The gain erased Monday's 38.47-point loss and left the 30-stock average at its highest close since July 12. International Business Machines Corp. and Walt Disney Co. rose the most.

Falling bond yields helped stocks, undoing most of the damage done Monday from rising yields. The 30-year Treasury bond's yield, a gauge of inflation expectations, fell 6 basis points to 7.03 percent.

Among broad stock market indexes, the Nasdaq composite index rose 5.48 to 1,071.95 after falling as much as 2.96 points earlier. The Standard & Poor's 500 index jumped 4.35 to 635.26, its third gain in four days.

Spurring the Nasdaq's advance were gains in computer, semiconductor and software shares.

Better-than-expected profit reports last week from Compaq Computer Corp. and IBM helped drive the index higher. Also, Digital Equipment Corp. said it would repurchase up to 10 million shares.

IBM rose $2.625 to $107.375, Intel Corp. climbed $1.50 to $74.375, Microsoft Corp. rose $1.75 to $118.625, Compaq Computer Corp. rallied $3 to $54.25, Computer Associates International Inc. climbed $1.75 to $48.625 and Digital Equipment rose 62.5 cents to $36.125.

About 341 million shares changed hands on the New York Stock Exchange, leaving volume below its three-month daily average of 400 million shares for a third straight day.

The drop in bond yields spurred bank shares as investors bet that consumers and business would take out more loans as borrowing costs dropped.

Chase Manhattan Corp. rose 87.5 cents to $68.75, Citicorp jumped $1.125 to $81.50, NationsBank Corp. climbed $1.50 to $84.875, Norwest Corp. jumped $1 to $34.875, First Union Corp. rose 37.5 cents to $63.25 and Wells Fargo & Co. shares increased $2.50 to $229.25.

Helping boost stocks yesterday were more reports of better-than-expected profits for the three months ended June 30. Shares of WorldCom Inc. gained $2.375 to $24.50 after the company said second-quarter earnings rose 81 percent to a record, helped by a 20 percent rise in the amount of traffic carried on its phone network.

Bear Stearns Cos.' stock rose 25 cents to $22.125 after the securities brokerage company said its fiscal fourth-quarter profit jumped 82 percent, helped by its investment banking and trading business.

Oil stocks were the biggest losers on the day, falling amid concern that Iraq's re-entry into the world's crude market may hurt prices for the commodity.

The price of oil has fallen almost $1.50 a barrel to $20.25 since July 15. Also, natural gas is trading at six-month lows, another potential dent in companies' revenue during the second half of the year.

Exxon Corp. slid 87.5 cents to $81.75, Texaco fell 12.5 cents to $84.375, Mobil Corp. dropped $1.625 to $108.875, Anadarko Petroleum Corp. slumped $1.875 to $52.75 and Chevron Corp. lost 50 cents to $57.125.

The Russell 2000 index of small capitalization stocks rose 0.42 to 313.54; the Wilshire 5,000 index, made up of stocks on the New York, American and Nasdaq stock markets, gained 29.05 to 6,203.72; the Amex market value index climbed 0.66 to 536.78 and the S&P 400 midcap index rose 1.22 to 218.99.

Pub Date: 7/31/96

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