Dow rises to 8,178 as tech stocks show gains Motorola's 3rd quarter tops expectations, sparks optimism on earnings

October 08, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks rose to records as bellwether Motorola Inc. kicked off the third-quarter earnings season by topping expectations, sparking optimism that companies will exceed analyst forecasts for a 19th straight quarter.

"We expect strong earnings out of many tech stocks as strong demand for computers and networking equipment continues," said Doug MacKay, who helps run the $370 million White Oak Growth Stock Fund for Oak Associates in Akron, Ohio.

White Oak, which ranks in the top 5 percent of U.S. growth funds this year, has holdings in Cisco Systems Inc., Intel Corp. and Microsoft Corp.

Optimism for earnings began with computer stocks and spread to other industries, such as drug manufacturing. U.S. companies will report third-quarter earnings during the next three weeks. Analysts said profits must meet or beat expectations for stocks to extend their recent records, because share prices already reflect most of the good news about lower interest rates.

The Dow Jones industrial average rose 78.09, or 1 percent, to 8,178.31, its biggest gain in two weeks, and is 81 points from its Aug. 6 record.

AT&T Corp. rose the most in the Dow, climbing $1.50 to $45.4375 after USA Today reported that the nation's No. 1 long-distance company may be discussing a merger with GTE Corp. Both telephone companies declined to comment. GTE rose $1.625 to $50.625.

Broader stock market gauges set records. The Standard & Poor's 500 index jumped 10.43, or 1.1 percent, to 983.12, and the Nasdaq composite index gained 15.36, or 1.1 percent, to 1,737.27, each notching its biggest gain in three weeks and fourth consecutive all-time high.

In addition, the Russell 2,000 index of small capitalization stocks added 2.08 to 463.78; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, climbed 80.85 to 9,486.69; the American Stock Exchange composite index increased 5.10 to 721.90; and the S&P 400 mid-cap index gained 1.66 to 339.84. All were records.

Advancing stocks topped declining ones 1,605 to 1,263 on the New York Stock Exchange. Almost 551 million shares traded, exceeding the three-month daily average of 528 million shares.

Motorola rose $2.1875 to $73.1875 after the maker of semiconductors and cellular telephones said its third-quarter earnings rose 59 percent. Motorola's profit before charges rose to $328 million, or 54 cents a share, topping the 51 cents analysts expected.

The Morgan Stanley high-tech index jumped 6.10, or 1.2 percent, to 529.06 as Intel rose $1.75 to $95.25; Microsoft climbed $1.4375 to $136.5625; Texas Instruments Inc. jumped $2.4375 to $132.875; Tellabs Inc. rose $2.125 to $57.25; and PeopleSoft Inc. gained $2.375 to $57.75.

Lucent Technologies Inc. jumped $2.75 to $88.8125, a day after the company promoted President and Chief Operating Officer Richard McGinn to chief executive to succeed Henry Schact.

Among the laggards, Reader's Digest Association Inc. dropped $2.9375 to $28.125 after the company said it expects a fiscal first-quarter loss due to weaker-than-expected sales caused in part by a strong dollar.

And E Trade Group Inc. tumbled $5.3125 to $34 on concern that profit will slide as competition heats up with Charles Schwab Corp. and other companies with fast-growing online securities trading businesses.

The yield on the benchmark 30-year Treasury bond fell 3 basis points to 6.23 percent.

Drug shares advanced amid optimism that newly approved drugs will bolster companies' bottom lines. Schering-Plough Corp. climbed $2.375 to $56.875; Pfizer Inc. rose $2.25 to $65; and Eli Lilly & Co. gained $4.375 to $131.625. Merck & Co. rose $1.3125 to $102.4375.

Pub Date: 10/08/97

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