Stocks recover after slump of 3 days Dow up 74.41, as profit fear subsides

AT&T, Eli Lilly, computer shares lead way

Wall Street

October 21, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks rose for the first time in four days after AT&T Corp. and Eli Lilly & Co. reported earnings that topped expectations, easing concern that slowing profits will derail this year's rally.

A rebound in computer-related issues such as Intel Corp. fueled the advance. Investors said last week's rout in those shares, triggered by concern about profits, was overdone.

Microsoft Corp. and International Business Machines Corp., two of the industry's most-watched companies, reported third-quarter earnings that beat Wall Street estimates after the close of trading.

Both stocks rose.

The Dow Jones industrial average advanced 74.41, or 1 percent, to 7,921.44 after a three-day slide that shaved 250 points from the average.

The Standard & Poor's 500 index rose 11.45, or 1.2 percent, to 955.61. The Nasdaq composite index, packed with computer-industry shares, jumped 18.60, or 1.1 percent, to 1.685.45.

Among other broad market indexes, the Russell 2,000 index of small capitalization stocks jumped 6.08 to 453.85; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, climbed 104.80 to 9,259.56; the American Stock Exchange composite index added 5.70 to 721.90; and the S&P 400 midcap index gained 4.09 to 334.20.

AT&T shares closed up $2.3125 at $47.50 after rising to $47.75, their highest in more than two years. The nation's No. 1 long-distance telephone company reported profit from continuing operations of 71 cents a share, topping forecasts of 65 cents a share; named a new chairman and chief executive; and said it plans to sell its AT&T Universal Card Services and AT&T Solutions Customer Care units.

Some 1,876 stocks rose and 1,005 shares fell on the New York Stock Exchange. About 483 million shares changed hands on the Big Board, below the three-month daily average of 527 million shares.

Eli Lilly rose $1.875 to $64.625 after reporting earnings of 41 cents a share, beating Wall Street's average forecast by a penny. The drug maker is the latest company to top forecasts this month. Of the 216 companies in the S&P 500 to report last quarter's profits, 56 percent topped estimates, 25 percent fell short and 19 percent were in line.

More mergers and acquisitions bolstered stocks. Shares of ITT Corp. jumped $5.375 to $75.75 after Starwood Lodging Trust agreed to buy the company for $13.3 billion, or $82 a share, in cash, stock and assumed debt. Investors said the surprise move all but ends Hilton Hotels Corp.'s smaller bid. Starwood Lodging rose $1.125 to $57.625 and Hilton Hotels rose 56.25 cents to $33.

LIN Television Corp. rose $1.8125 to $52.125 after Raycom Media Inc. made a surprise bid for the company that tops an offer of $1.7 billion from Hicks, Muse, Tate & Furst Inc. Raycom is offering $52.50 a share, topping Hicks Muse's $47.50-a-share offer.

Sears, Roebuck & Co. fell $1.125 to $45.625. Richard Church, an analyst at Smith Barney Inc., lowered the firm's recommendation to "neutral" from "outperform." The analyst cited concern that Sears' earnings will be hurt as more credit card customers do not pay their bills.

Microsoft rose 37.5 cents to $132.50 in trading of 19.2 million shares, recovering from a $4.75 drop. After the market closed, the software company reported earnings of 72 cents a share, topping the average analyst forecast by 2 cents.

IBM rose $2.0625 to $97.50. After the market closed, the computer maker reported earnings of $1.38 a share, a penny above the average forecast.

Analysts said Microsoft and IBM had little margin for error.

Intel Corp. reported last week that its profit was short of estimates and the semiconductor maker's stock lost $8.4 billion of its value in a single day of trading.

The Morgan Stanley high tech index rose 7.79, or 1.6 percent, to 499.46. Last week, the index dropped 7.8 percent.

Compaq Computer Corp., which lost 9 percent last week, gained $1.875 to $71.375. Sun Microsystems Inc., which tumbled 15 percent last week, rose 81.25 cents to $39.1875.

Pub Date: 10/21/97

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