Stock indexes rebound Decliners lead gainers, but Dow adds 60 points

April 15, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks advanced yesterday for the first time in four sessions as higher profits from Travelers Group Inc. and Coca-Cola Co. offset concern that interest rates may rise further.

"The economy is still healthy, and earnings for many companies will continue to grow," said James Tillar, equity strategist at $4 billion-asset Dean Investment Associates, who has been buying shares of Intel Corp. "In many areas, such as technology and financial stocks, the valuations are compelling."

The Dow Jones industrial average rose 60.21 to 6,451.90, its biggest gain in four sessions, after being down almost 35 points. The 30-stock average was led by gains in International Business Machines Corp., up $3.125 to $136.50, and Procter & Gamble Co., $3.25 higher to $119.625.

The Standard & Poor's 500 index rose 6.08 to 743.73, and the Nasdaq composite index increased 9.51 to 1,216.41.

Soft drink and oil companies gained the most.

On the 2,000 index of small capitalization stocks slipped 0.64 to 338.61; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, jumped 37.56 to 7,097.53; the American Stock Exchange composite index lost 3.16 to 552.97; and the S&P mid-cap index added 0.48 to 249.42.

While major indexes gained, decliners outnumbered advancers by a margin of 3 to 2 on the New York Stock Exchange, in trading of 406 million shares, below the three-month average of 503 million.

"Institutional order flow is quieter than it's been in the last month," said Jon Olesky, head of block trading at Morgan Stanley Group Inc.

"People are not in the mood to make big bets."

Stocks tumbled in the past month as signs of faster inflation increased concern that additional Federal Reserve interest rate increases are on the way, after the Fed raised its target for the rate on overnight loans between banks to 5.50 percent from 5.25 percent last month.

The Dow industrials, up 0.06 percent for the year, have fallen 9.3 percent since posting records March 11. Central bankers are expected to raise rates again next month.

"People can handle a 9 or 10 percent correction," said Gregory Knopf, who oversees $5 billion as head of mutual funds for the Union Bank of California. "But we have a lot of new investors in the market. If the market were to fall 15 percent, who knows? The market psychology can change very quickly."

Intel weakens after report

Intel gained $3.25 during the day as investors waited for the chip maker to report earnings. It lost the gains and fell 62.5 cents to $129.875 after the report, which was released after the Nasdaq market closed.

While profits more than doubled to $2.20 a share, beating analysts' forecasts of $2.07 a share, Intel said second-quarter sales will be unchanged or "slightly" higher than in the first quarter. Gross margins will narrow from the first quarter's 64 percent, the company said.

Travelers Group gained $2 to $48.375 after first-quarter earnings climbed to 95 cents a share, 3 cents above analysts' projections.

Coke rises $1.875

Coca-Cola rose $1.875 to $55.625 after the world's largest soft-drink maker reported net income of 40 cents a share, in line with analysts' estimates. Earnings rose 11 percent on higher-than- expected sales in Europe and North America.

General Motors Corp. rose 62.5 cents to $53.625, after the world's largest automaker said first-quarter profit more than doubled, and profit from continuing operations rose to $2.30 a share, 21 cents more than analysts polled by IBES International Inc.

Better-than-expected earnings reports have been increasingly common. Of the 61 companies in the Standard & Poor's 500 index that reported this year, 47.6 percent said earnings were greater than forecast, up from 45 percent a year ago. Per-share earnings rose 8 percent in the first quarter of 1997, up from 6.2 percent a year earlier.

Donaldson, Lufkin & Jenrette Inc. fell 25 cents to $37.75, after reporting first-quarter earnings of $1.35 a share, 30 cents ahead of expectations.

Novellus falls $22.25

Novellus Systems Inc. was among the biggest decliners. The chip-making equipment maker plunged $22.25 to $53 after it lost a patent-infringement lawsuit, which could cut 10 percent to 20 percent from sales. Novellus also reported lower first-quarter earnings and revenue, while analysts said new orders were less than expected.

Bonds were little changed yesterday. The benchmark 30-year Treasury bond yields 7.17 percent, near its nine-month high. Yields climbed 6 basis points Friday after the government reported signs of quickening inflation.

Telephone stocks were the biggest losers among S&P 500 industry groups.

Investors often buy these shares because of their high dividends. Rising rates make those dividends less attractive.

NationsBank Corp. rose 12.5 cents to $55.625, after reporting first-quarter net income of 97 cents a share, 2 cents ahead of expectations.

Bank of New York Co.'s profit leaped 9 percent, and First Chicago NBD Corp.'s first-quarter results were 12 percent higher than a year ago.

The Keefe, Bruyette & Woods bank index rallied 4.84, or 0.89 percent, to 549.91.

Bank of New York rose 62.5 cents to $34.50; First Chicago NBD Corp. climbed 87.5 cents to $52.25; Citicorp rallied $1.625 to $106.50; and Chase Manhattan Corp. rose 25 cents to $90.50.

Boeing Co. rose 37.5 cents to $100.75, after Continental Airlines Inc.'s chief executive told the Wall Street Journal that the airline may follow American Airlines and Delta Air Lines Inc. in making the jet manufacturer its sole supplier of planes. Continental Class B shares fell 50 cents to $30.50.

Pub Date: 4/15/97

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