Stocks rally on Greenspan remarks

March 06, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks staged their biggest rally in three weeks yesterday after Federal Reserve Chairman Alan Greenspan said shares aren't overvalued as long as corporate earnings live up to expectations.

Oil shares were among the biggest gainers, paced by rallies in Royal Dutch Petroleum Co. and Exxon Corp. Greenspan's comments were welcome news to investors, who were broadsided one week ago when the chairman warned the stock market's two-year rally may have pushed prices to unsustainable levels.

"There was relief that he didn't press the point about the market being out of control," said Andy Abrams, a money manager at CWH Associates, which manages $100 million. "In the end, he's doing what he's supposed to do: be the watchdog that makes sure things don't get totally out of line."

The Dow Jones industrial average rose 93.13 to 6,945.85, led by gains in Boeing Co., Merck & Co. and DuPont Co. The 30-stock average had dropped 185 points, or 2.6 percent, since Greenspan said a week ago that the two-year rally in share prices "obviously raised questions of sustainability."

Boeing rose $4.375 to $04.625 on the company's prediction Tuesday that the world's airlines will buy more than 16,160 new jetliners worth about $1.1 trillion during the next 20 years. The forecast was up from last year's estimate of 15,900 new planes.

The Standard & Poor's 500 index gained 11.04 to 801.99, its biggest gain since Feb. 12, when Applied Materials Inc. posted unexpectedly strong earnings. The Nasdaq composite index rose 11.72 to 1,329.09, as Intel Corp. climbed $3.125 to $149.50; Cisco Systems Inc. rose $1.125 to $56.875; and Microsoft Corp. rose $1.75 to $100.875.

Among broad U.S. stock indexes, the Russell 2,000 index of small capitalization stocks rose 2.02 to 363.93; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, gained 85.49 to 7,658.89; the American Stock Exchange composite index jumped 3.84 to 600.88, its high for this year; and the S&P 400 midcap index rose 1.69 to 265.37.

Yesterday's most active stocks in U.S. trading were Corporate Express, AT&T Corp., Staples Inc., Intel and Sun Microsystems Inc.

About 1,604 stocks rose and 945 issues fell on the New York Stock Exchange, where some 532.5 million shares traded.

Citicorp rose $4 to $122.125 and J. P. Morgan & Co. gained $2.50 to $107.875 after Greenspan's remarks. Later in the day, Greenspan told a congressional subcommittee that the Fed wouldn't raise interest rates solely "as a tool to prick a stock market bubble."

The S&P 500 oil index rallied 10.26 to 652.66, bringing its two-day advance to 17.32 points, or 2.7 percent. Analysts said that companies like Mobil and Exxon Corp. will probably be able to post consistent earnings gains this year amid steady demand for oil and gas.

"The easy money has been made in this market," said Joseph Stocke, a money manager at Corestates/Meridian Investment Co., which oversees $2.5 billion. "It's becoming necessary to focus on picking companies in industries and sectors that are due for better performance relative to the market."

Mobil jumped $2 to $129.50; Exxon Corp. climbed $1.25 to $101.25; Royal Dutch Petroleum climbed $5.375 to $178.125; and Amoco Corp. gained $1 to $85.375.

Investors continue to show little tolerance for companies that disappoint earnings expectations. Corporate Express Inc. fell $8.25 to $10.0625, after the office products company said fiscal 1997 profit will fall short of Wall Street expectations because of weakness in its same-day delivery business.

And Broderbund Software Inc. tumbled $7.375 to $23.125 after the software company said its fiscal second-quarter profit will be 15 cents to 20 cents a share, well below the forecast of 32 cents a share.

Kmart Corp. rose 12.5 cents to $13 after the retailer reported profit from operations of 45 cents a share, 12 cents above analysts' expectations.

Texas Instruments Inc. rallied $1.625 to $83.25, leading gains in other semiconductor stocks.

Pub Date: 3/06/97

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