Drug firms lead way for another advance Dow index rises 119.5 as earnings reports ease fears over Asia

Wall Street

January 21, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks rose for a fifth time in six sessions yesterday, led by drug shares, after merger talks between SmithKline Beecham PLC and American Home Products Corp. ignited speculation that other acquisitions may follow.

Continental Airlines Inc., Lucent Technologies Inc. and Reynolds Metals Co. rose after reporting better-than-expected earnings, easing concern that a slowdown in Asian economies may have damped U.S. profit growth.

The Dow Jones industrial average rose 119.57, or 1.5 percent, to 7,873.12, its biggest gain since Dec. 30. Drug maker Merck & Co., the fifth biggest stock in the United States based on market capitalization, led the rise, climbing $5.75 to $115.50.

The Standard & Poor's 500 index rose 17.09, or 1.8 percent, to 978.60, and the Nasdaq composite index jumped 27.26, or 1.7 percent, to 1,590.14. Six of the top 10 gainers in the S&P 500 were drug stocks.

International Business Machines Corp. rose $2.6875 to $107.6875, spurring computer-related shares higher amid speculation that the world's largest computer maker would report stronger-than-expected fourth-quarter earnings after the close of trading yesterday. The company reported earnings rose to $2.16 a share from $1.97, beating expectations by a penny.

Comments by Gary Stern, president of the Federal Reserve Bank of Minneapolis, fueled the market's advance. The official said it is "less likely" the central bank will raise interest rates in the coming months because cheap Asian imports will keep U.S. inflation in check. Low rates boost the attraction of returns offered on stocks.

Among other broad market indexes, the Russell 2,000 index of small capitalization stocks added 5.06 to 431.31; the Wilshire 5,000 index of the stocks on the New York, American and Nasdaq stock exchanges jumped 149.23 to 9,331.61; the American Stock Exchange composite index climbed 9.38 to 673.37; and the S&P 400 midcap index gained 4.39 to 326.46.

About two stocks rose for every one that fell on the New York Stock Exchange. More than 644 million shares changed hands on the Big Board, 11 percent above the three-month daily average.

Regal Cinemas Inc. was the third most active stock, falling 81.25 cents to $29.4375 in trading of 11.3 million shares. Hicks, Muse, Tate & Furst Inc. and Kohlberg Kravis Roberts & Co. agreed to buy the company and combine it with their existing theaters, creating the largest U.S. chain of movie houses.

Drugmakers recorded their biggest rally since Oct. 28, the day after the Dow industrials tumbled 7.2 percent. The American Stock Exchange pharmaceuticals index rose 28.16, or 5.1 percent, to 580.84, as SmithKline's American depositary receipts rose $2.5625 to $59.5625 and American Home surged $13.5625 to $94.25. Eli Lilly & Co. gained $2.625 to $69.625. Warner-Lambert jumped $9.125 to $138.25. Pfizer Inc. jumped $3.8125 to $80.8125 after topping earnings estimates.

Companies created through recent mergers gained. Glaxo Wellcome PLC's ADRs rose $2.1875 to $54.5625 and Pharmacia & Upjohn Inc. rose $2.6875 to $37.6875.

Advanta Corp. rose $1.25 to $29.50 after the company said it is buying back $850 million of its common stock for $40 a share, using the proceeds of the sale of its credit card business to Fleet Financial Group last year.

Ameren Corp. dropped $3.4375 to $37.0625 after it warned that it will take a fourth-quarter charge of $52 million related to Illinois' opening electricity sales to competition.

Buttrey Food & Drug Stores Co. rallied $4.50 to $15.25. Albertson's Inc. said it will buy the company for $169 million in cash and assumed debt.

KLA-Tencor Corp. rallied $3.50 to $40.4375. The semiconductor equipment company said net income for its second quarter that ended Dec. 31 rose to 59 cents a share from 40 cents, in line with estimates.

Pub Date: 1/21/98

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