Stocks rally behind computers Dow industrials gain 29 points, to 6,555

Nasdaq strong again

April 08, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks rallied yesterday for a second day, led by Microsoft Corp. and Cisco Systems Inc., on optimism that computer company profits will grow faster than forecast and help lift stocks from their recent lows.

"The odds are building that the correction is over," said Bob Streed, a money manager with $4 billion Northern Investment Counselors in Chicago, who has been buying shares of Intel Corp.

The Dow Jones industrial average gained 29.84 to 6,555.91, led by International Business Machines Corp., and is up 78 points in the past two sessions.

The Nasdaq composite index, dominated by computer-related stocks, gained 14.62 to 1,251, which left it 4.2 percent above a six-month low of 1,201 recorded April 2. Leading the gains: Cisco Systems rose $3.5625 to $54.4375, and Microsoft advanced $1.6875 to $95.875.

Financial shares rose on expectations that after Bankers Trust New York Corp. and Alex. Brown Inc. combine in a $1.7 billion deal, it will prompt similar transactions involving other securities firms. Alex. Brown soared $10 to $63.125. Bankers Trust fell $2.75 to $79.50.

The Standard & Poor's 500 index rose 4.23 to 762.13.

On the broad market, the Russell 2,000 index of small capitalization stocks gained 4.07 to 344.91; the Wilshire 5,000 index jumped 59.03 to 7272.99; the American Stock Exchange composite index climbed 3.71 to 560.44; and the S&P mid-cap index added 3.00 to 255.06.

Microsoft shares rose $1.6875 to $95.875 on news that the company will buy WebTV Networks Inc. for $425 million.

Computer-related stocks rose after Morgan & Stanley & Co.'s chief U.S. strategist, Byron Wien, said semiconductor stocks are among the most attractive in the U.S. stock market. Wien specifically recommended Intel, which rose 12 1/2 cents to $145.125, and Advanced Micro Devices Inc., up $3.125 to $42.75.

Some 1,719 stocks rose and 777 fell on the New York Stock Exchange, where some 453 million shares traded.

Shares of America Online Inc., the world's largest online service, tumbled $4.125 to $44.25 after Morgan Stanley & Co. and Cowen & Co. said AOL is unlikely to buy CompuServe Corp. at current prices. CompuServe dropped $1.625 to $12. The Wall Street Journal reported that AOL was negotiating to buy CompuServe for $11 to $14 a share.

Rational Software Corp. plummeted $9.75 to $13.625. The company said it will buy Pure Atria Corp. in a stock swap valued at $917 million before concerns over combining the software-tools makers lopped 42 percent of the price. Analysts said the acquisition of Pure Atria, which expects lower profit for the quarter ended March 31, would cut into earnings. Pure Atria fell $7.75 to $10.

Nike Inc. fell $4.25 to $54.875 after the No. 1 athletic shoe maker was downgraded to neutral by Smith Barney Inc. analyst Faye Landes. Landes also wrote that Nike will reduce its production of footwear by more than 20 percent. Reebok International Ltd. rose $1.25 to $46.375 after Landes upgraded the stock to "outperform" from "neutral."

Parametric Technology Corp. shares dropped $4.50 to $40.625 after Wessels Arnold & Henderson analyst Peter Schleider issued a report saying that foreign exchange movements will depress the software company's second-quarter profit. Last week, Parametric was added to the S&P 500, replacing Pacific Telesis Group.

Securities firms seen as takeover candidates gained. Lehman Brothers Holding Inc. rose $3 to $33.50, and Salomon Inc. gained $1.125 to $55.25. Raymond James Financial Inc. jumped $2.625 to $23.375; A. G. Edwards Inc. rose $1.75 to $35.25; Hambrecht & Quist Group gained $3 to $20.875; and Legg Mason Inc. soared $4 to $49.

Among other rising securities firms, Hartford, Conn.-based Advest Inc. gained $1.25 to $13.125, and Piper Jaffray Cos. of Minneapolis rose $2 to $16.75.

Pub Date: 4/08/97

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