Stocks rally as outlook for profits brightens $19 billion in notes sold by Treasury at lowest yield since Feb.

August 07, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks rallied yesterday for the fifth time in six days as the Treasury sold $19 billion of three-year notes at the lowest yield since February. The sale built confidence that the economy and corporate profits will go on expanding.

Construction, housing and hardware stocks registered some of the largest gains, boosted by the outlook for moderate economic growth as well as three series of computer-guided "buy" orders.

The Dow Jones industrial average surged 21.83 points to 5,696.11, rebounding from a midday slide of 26.26.

In the broader market, the Standard & Poor's 500 index rose 2.15 to 662.38 after tumbling 3.4 to 656.83, and the Nasdaq composite index advanced 8.34 to 1,128.87, recovering from a 6.58-point decline.

U.S. bonds were little changed after the Treasury's auction of three-year notes. Yields on 30-year bonds were at 6.75 percent, down from 6.76 percent Monday.

Construction and homebuilding companies, whose businesses pick up as interest rates decline, benefited from the drop in 30-year bond yields, which were at 7.19 percent as recently as mid-June.

Among homebuilders, Centex Corp. rose 37.5 cents to $31.50; Pulte Corp. gained 37.5 cents to $26.625; Kaufman & Broad Home Corp. advanced 25 cents to $13.125; Schuler Homes Inc. rose 50 cents to $6.375 after setting a 52-week low Friday; Continental Homes Holding Corp. advanced 25 cents to $20.125 and Clayton Homes Inc. increased 50 cents to $18.625.

Fluor Corp. surged $2.125 to $64.375 after it won a $5 billion, five-year contract to oversee the cleanup of the government's Hanford plutonium production site in Richland, Wash.

Fluor's partners, Lockheed Martin Corp. and WMX Technologies Inc., also advanced, Lockheed rising 87.5 cents to $85.125 and WMX gaining 87.5 cents to $31.75.

Makers of tools and hardware also strengthened. Black & Decker Corp. gained 75 cents to $38.375, Stanley Works Inc. rose 37.5 cents to $29.625 and Snap-On Inc. gained 75 cents to $45.50.

Advancing stocks outnumbered declining issues by 12-11 on the New York Stock Exchange, where volume was slow as 347 million shares changed hands.

The Russell 2000 index advanced 0.56 to 325.3 and the Wilshire 5000 index of stocks on the New York and American exchanges and Nasdaq stock market rose 22.82 to 6,465.47.

Many retail stocks dropped after a weekly report showed retail sales gained just 0.3 percent last week because of cool weather and consumers' attention to the Olympics.

"Retail sales are going to stay weak for a while" as consumers repay household debt, said Bruce Bittles, market analyst at J. C. Bradford & Co. in Nashville, Tenn.

J. C. Penney Co. retreated $1.375 to $51.625. The Texas-based department-store chain agreed to buy Fay's Inc., a drug-store chain, for $285 million in stock. Fay's rose 37.5 cents to $12.25.

Federated Department Stores Inc. fell 37.5 cents to $31.50 and Melville Corp. fell 37.5 cents to $40.125.

U.S. Long Distance Corp., the most active stock as 8.3 million shares changed hands, climbed $2.6875 to $7.0625. The company was raised to "buy" from "neutral" at Interstate/ Johnson Lane.

Sun Microsystems Inc., the second-most-active stock as 8.2 million shares traded, sank $2.375 to $53.25. An analyst at Donaldson, Lufkin & Jenrette cut his investment opinion on the stock because of growing competition for its flagship computer workstations.

Wallace Computer Services Inc. slumped $2.625 to $27.75. Canada's Moore Corp., down 12.5 cents to $15.75, dropped a yearlong battle to buy its U.S. rival in a $1.4 billion hostile takeover.

Airline stocks fell after five major carriers slashed fares, damaging their future earnings outlook, and as investors grew ,, concerned that Congress will soon reimpose a 10 percent ticket surcharge.

Pub Date: 8/07/96

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