NEW YORK -- U.S. stocks rose yesterday for a second day, as investors bid up Microsoft Corp., Intel Corp. and other computer shares on confidence that prices are now in line with their profit outlook and the inventory glut is largely over.
The Nasdaq composite index, crammed with computer-related companies, staged its biggest rally in five months, gaining 41.31, or 2.3 percent, to 1,829.51. The Dow Jones industrial average rose 30.90 to 8,577.68, though it's still down 3.4 percent for the week after two days of wide swings. The Standard & Poor's 500 index climbed 8.20 to 1,089.63.
Microsoft rose $2.5625 to $106.875; Intel gained $2.875 to $87; and Compaq Computer Corp. jumped $3.1875 to $35.125.
Investors also purchased battered shares of small companies. The Russell 2,000 index, which fell 19 percent from its April 21 record through Wednesday, rose 7.93, or 1.9 percent, to 406.62. That's the biggest gain for the index since Oct. 28.
Among other broad indexes, the Wilshire 5,000 index gained 104.47 to 10,112.69; the American Stock Exchange composite index gained 4.88 to 676.95; and the S&P 400 midcap index added 5.82 to 334.99.
The Sun-Bloomberg Maryland index, which tracks the top 100 Maryland stocks by market valuation, gained 1.98 to 207.98.
Some 760 million shares changed hands on the New York Stock Exchange, the seventh-busiest day ever. Wednesday and Tuesday were the second- and third-busiest, respectively.
Investors had no mercy on American Express Co., United Healthcare Corp., Royal Dutch Petroleum Co. and other companies with disappointing earnings news.
Compaq Computer was the most active stock on U.S. exchanges, as 25 million shares traded. The No. 1 personal-computer maker's European sales rose more than 34 percent in the second quarter.
Seagate Technology Inc. and other computer disk-drive makers surged. Seagate jumped $2.5625 to $24.5625; Quantum Corp. rose $2.50 to $17.50; and Western Digital Corp. gained $1.6875 to $12.25.
National Semiconductor Corp. climbed $2, or 17 percent, to $13.875, after analyst Krishna Shankar at Donaldson, Lufkin & Jenrette Securities Corp. raised the stock to "top pick" from "buy."
Computer shares also climbed on speculation that Sun Microsystems Inc. would be bought by International Business Machines Corp. Sun Microsystems rose $1.0625 to $48.875 after gaining 5.2 percent Wednesday. IBM added $1 to $129.75.
Wal-Mart Stores Inc. rose $3 to $64 after reporting that sales rose 7.1 percent.
Ann Taylor jumped $5 to $26.75 after the retailer of women's clothes said it expects to report earnings of 24 cents to 27 cents a share in the second quarter. Analysts surveyed by First Call Corp. expect the company to earn 17 cents a share. Ann Taylor also said sales at stores open at least a year rose 23.2 percent last month.
Talbots Inc. rose $2.3125 to $24.0625 after it said it will report an unexpected profit in the fiscal second quarter.
Stage Stores Inc. plunged $13.125 to $10.375 after the company warned for a second time that its fiscal second-quarter earnings will be lower than expected as scorching hot weather in the Southwest hurt sales. Stage operates the Bealls, Palais Royal and Stage Clothing stores.
American Express fell $7.375 to $101.0625, shaving 30 points from the Dow average.
Health care stocks dropped on bad earnings news. Medtronic Inc. tumbled $5.9375 to $53.4375, after the world's largest pacemaker company said it expects fiscal first-quarter earnings to miss analyst expectations.
United HealthCare Corp. plunged $15 to $37.875 after the company surprised investors with a $900 million pretax charge in the second quarter, resulting in a loss for the second-largest U.S. health insurer and jeopardizing its plan to buy Humana Inc. Humana sank $6.625 to $19.125.
Humana said it would begin talks with United about how the news might affect the acquisition.
Oil shares slumped after the Royal Dutch/Shell Group said its second-quarter profit fell 17 percent, more than expected, as crude oil prices fell to the lowest in 12 years.
Royal Dutch Petroleum Co., the U.S.-traded company that owns 60 percent of Royal Dutch/Shell, fell $3.4375 to $45.6875. Exxon Corp. lost $1.25 to $64.9375 and Chevron Corp. dropped $1.75 to $76.9375.
Pub Date: 8/07/98