Stocks rise to close out a month of poor results Encouraging signals of low inflation help market shrug off July

August 01, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks ended their worst month in more than two years with a gain yesterday, as optimism grew that inflation won't accelerate and cause corporate borrowing costs to rise.

Shares of long-distance phone companies AT&T Corp. and MCI Communications Corp. paced the day's advance.

Another round of economic reports suggesting that prices for goods and services are not climbing too rapidly spurred expectations that the Federal Reserve will pass on a chance to raise benchmark lending rates this month.

The Dow Jones industrial average rose 46.98 to 5,528.91, after rallying 47.34 points yesterday. The broader Standard & Poor's 500 index, which represents about 75 percent of the value of all stocks traded in the United States, jumped 4.69 to 639.95. For the month, though, the S&P 500 fell 4.57 percent.

Among the Dow industrials, General Electric Co., Philip Morris Cos. and United Technologies Corp. rose the most. Even with today's gains, though, the 30-stock average was down 2.2 percent for the month -- its biggest monthly loss since November Shares of AT&T rose $1.25 to $52.25 after Stephanie Comfort, an analyst at Morgan Stanley & Co., reinstated her "strong buy" recommendation on the stock. Other long-distance companies whose stocks rose included MCI Communications Corp., up $1 to $24.625, Sprint Corp., up 87.5 cents to $36.625, and WorldCom Inc., up $1.375 to $25.875.

General Electric jumped $2.125 to $82.25 on an Associated Press report that Japan plans to buy 130 F-2 fighter jets over the next 10 years, at a cost of $110 million each. GE will help make the engines for the planes, designed by Lockheed Martin Corp. Lockheed's stock jumped 81.25 cents to $83.0625.

The Nasdaq composite index rose 8.64 to 1,080.59. As with the Dow and S&P 500, it was not a good month for the Nasdaq: Its 8.8 percent decline was its worst since a 13 percent slide in August 1990, when the country was on the verge of a recession.

About 1,534 stocks advanced and 879 issues fell on the New York Stock Exchange, where 402.6 million shares traded.

Bank shares gained as the yield on the benchmark 30-year Treasury bond, a gauge of inflation expectations, fell 6 basis points to 6.97 percent. The drop in bond yields was spurred by an unexpected drop in the Chicago Purchasing Management Association's index of manufacturing activity in July.

The prospect of increased borrowing activity sent the S&P regional bank index of 22 stocks up 1.45 to 258.09. Wells Fargo & Co. gained $3.625 to $232.875, Bank of New York Co. rose 62.5 cents to $51.50 and NationsBank Corp. jumped $1.125 to $86.

Another report that will shape inflation expectations comes tomorrow, when the government releases its monthly employment report.

Some companies that recently announced stock buybacks rose. Bear Stearns Cos. said Tuesday that it would buy back up to $250 million of its shares, and its shares rose 37.5 cents to XTC $22.50 yesterday. Reebok International Ltd.'s stock, which closed unchanged at $35, is up 12 percent this week after the company told investors it may buy back a third of its shares.

Chrysler Corp. led an advance in shares of automakers. The nation's No. 3 car company's stock rose after it said cost-saving suggestions made by its suppliers would shave $1 billion from its auto parts spending over the next four years. Shares of Chrysler climbed $1.125 to $28.375, General Motors Corp. rose 50 cents to $48.75 and Ford Motor Co. ended unchanged at $32.375 after rising as high as $32.75.

The Russell 2000 index of small capitalization stocks rose 2.46 to 316.00; the Wilshire 5,000 index, made up of stocks on the New York, American and Nasdaq stock exchanges, gained 43.31 to 6247.03; the Amex market value index climbed 2.72 to 539.5 and the S&P 400 midcap index rose 0.81 to 219.8.

Pub Date: 8/01/96

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