Stocks rise, prompted by inaction on rates Financial shares lead the advance

Dow Jones up 39.98

December 18, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks rallied yesterday for the first time in more than a week, recovering from early losses, as the Federal Reserve left key interest rates unchanged and Treasury bond yields fell from the day's highs.

Bank and other financial stocks, whose cost of capital won't rise as a result of the Fed's inaction, led the advance. Regional banks, such as Banc One Corp., logged their biggest one-day gains since July 1992. Computer stocks such as Intel Corp., Microsoft Corp. and International Business Machines Corp. recovered from Monday's steep declines.

The Dow Jones industrial average jumped more than 50 points, triggering New York Stock Exchange trading curbs, before the 30-stock average closed at 6,308.33, up 39.98, after falling 31.91 points early in the day.

Declining stocks outnumbered advancing issues 1,253 to 1,236 on the New York Stock Exchange. Big Board volume vaulted to 520 million shares from this year's average of 410 million.

Rates on benchmark 30-year bonds rose as high as 6.69 percent, 7 basis points higher than Monday, then settled at 6.65 percent, helping spur the rally in stocks.

The Standard & Poor's 500 index fell 4.29, then rebounded to 726.04, up 5.06. The Nasdaq composite index dropped 9.95, then recovered to 1,266.32, up 5.34.

The Russell 2,000 index of small-company shares fell 0.35 to 350.13; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, jumped 29.51 to 7,028.13; the American Stock Exchange market value index dropped 2.26 to 570.31; and the S&P midcap index lost .21 to 247.37.

Bank stocks, among the market's biggest losers since the Dow industrials and the S&P 500 last reached records, registered large gains after the Fed meeting adjourned. NationsBank Corp. soared $3 to $95.25; Wells Fargo & Co. climbed $7.75 to $270.25; First Union Corp. rose $2 to $73.50; Banc One gained $1.625 to $43.125; J. P. Morgan & Co. added $2.625 to $97.375; and Citicorp surged $3.125 to $101.875.

Computer-related stocks rebounded from Monday's late decline. Microsoft rose $3.125 to $79.875; IBM gained $3.25 to $151.875; and Intel gained $2.75 to $130. Other software and semiconductor stocks also rallied.

Ascend Communications Inc. climbed $4.125 to $66, a day after sliding 5.50 points. The maker of computer networking equipment was rated "buy" in new investment coverage at Dillon Read & Co., which said it ought to rise to at least $90 a share within one year.

But Micron Technology Inc. slid 42.50 to $32.25 after the company said prices for its memory chips will continue to decline and its production growth will slow this quarter.

Oil stocks continued a rally, bolstered by crude oil approaching $26 a barrel and by Amoco Corp.'s announcement it will post record earnings this year and buy back up to $2 billion of stock during the next two years. Chicago-based Amoco also raised its quarterly dividend 8 percent.

Exxon Corp. gained $2 to $96.50; Royal Dutch Petroleum Co. rose $1.125 to $167; Amoco Corp. advanced $1.625 to $77.50; Phillips Petroleum Co. added $1.50 to $43.75; Atlantic Richfield Co. climbed $1.125 to $132.125; and Texaco Inc. jumped $1.25 to $97.75.

Oil exploration and drilling stocks also climbed after Salomon Brothers either raised earnings estimates or investment opinions.

Paragon Group Inc., an apartment building owner, surged $1.125 to $17.50 after Camden Property Trust agreed to buy it for $625 million in stock. Camden fell 12.5 cents to $28.50.

Homebuilders and building materials makers declined after November's housing report. Centex fell 37.5 cents to $34; Pulte lost 62.5 cents to $29.25; and Owens Corning lost 25 cents to $39.75.

Home Depot Inc. climbed $1.50 to $50. Prudential Securities raised its investment opinion to "buy" from "hold" and said the stock should reach $73 in a year.

Pub Date: 12/18/96

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