Stocks rally as Nasdaq surges Intel and Cisco rebound strongly

Dow index gains 48

April 05, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks staged their biggest rally in almost four weeks yesterday as Intel Corp., Cisco Systems Inc. and other computer-related shares rose on optimism that first-quarter profit reports will exceed expectations.

"We're going to see some big gains when earnings are announced," said Robert Finch, a money manager at Aeltus Investment Management, which oversees $38 billion. "Few of the big-name tech stocks came out and warned that they'd disappoint."

The Dow Jones industrial average advanced 48.72 to 6,526.07, recovering from a 72-point loss. Still, it was the worst week for the 30-stock average since June 1994.

Concern that the Federal Reserve will raise interest rates for a second time this year helped send the Dow down 3.2 percent for the week, leaving the once-robust 1997 advance at a modest 1.21 percent.

The Standard & Poor's 500 index rose 7.58 to 757.90, its biggest gain in almost four weeks. The surges in Intel and Cisco shares that helped the S&P 500 recover late in the day sent the Nasdaq composite index soaring 22.97 to 1,236.73.

The rally capped the best two days for the Nasdaq since Sept. 12-13.

The Russell 2,000 index of small capitalization stocks gained 4.46 to 340.84; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, spurted 76.35 to 7,213.96; the American Stock Exchange composite index added 1.09 to 556.73; and the S&P mid-cap index climbed 2.84 to 256.06.

The recovery included some of the computer-related shares that had fallen in recent weeks.

Cisco had plunged 37 percent from Jan. 21 to March 24. It gained $2.50 to $50.875 yesterday.

Intel rose $4.375 to $145; Applied Materials Inc. climbed $3.75 to $52.25; and Novellus Systems Inc. soared $7.50 to $77.

Makers of computers and computer parts rose as well. Dell Computer Corp. jumped $5.50 to $74.25 and Hewlett-Packard Co. climbed $2.125 to $52.75.

International Business Machines Corp. fell $2 to $129.125 after it was downgraded to "near-term neutral" from "buy" by Merrill Lynch & Co. analyst Daniel Mandresh. The analyst said IBM's earnings are likely to be disappointing through the middle of the year.

Advancing stocks outnumbered decliners 1,417 to 1,053. Some 537 million shares changed hands, compared with a three-month daily average of 512 million.

Among the day's movers, Office Depot Inc. shares plunged $6 to $13 and were the most actively traded on U.S. exchanges, after the Federal Trade Commission voted 4-1 to reject Staples Inc.'s $4 billion bid to acquire the company. Staples gained 62.5 cents to $21.875.

Alex. Brown Inc. shares soared $8.50 to $53.125 as investors bet for a second straight day that the Baltimore brokerage firm will be taken over by Bankers Trust New York Corp.

Centocur Inc. rose $4.625 to $36.125 after the biotechnology company reported a breakthrough in late-stage trials of its drug for Crohn's disease.

Checkpoint Systems Inc. fell $2.625 to $10.125 after the company said 1997 sales and earnings will be lower than expected partly because of costs from an aborted $397 million merger with Ultrak Inc.

Checkpoint said it expects first-quarter earnings of 7 cents, less than half the 17 cents analysts surveyed by IBES International Inc. expected. Ultrak fell $4.625 to $11.875.

"Bond yields are still high, and they provide lots of competition for stocks," said Dirk van Dijk, equity strategist with Dean Investment Associates, which manages $3.7 billion. "My gut is the market will take time to repair itself."

The yield on the benchmark 30-year Treasury bond rose 5 basis points to 7.12 percent.

Pub Date: 4/05/97

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