Dow Up 21.92, 4th Day in Row on the Plus Side

Market Overview

Highlights of Tuesday’s market activity, compiled from Times staff and wire reports:

* Stocks rose for the fourth straight session, as better-than-expected corporate earnings reports proved a welcome tonic.

The Dow Jones industrial average climbed 21.92 points to 3,041.37 in heavy trading. The NASDAQ composite index of smaller stocks hit a new high.

* Bond yields continued to ease, even though oil prices jumped again, nearing $24 a barrel on tight supply worries.

Stocks

Tuesday’s rally brought the gain in the Dow average to more than 95 points over the past four sessions and left the index within striking distance of its all-time record of 3,055.23 set on Aug. 28.

It was a broad rally: Advancing issues outnumbered declining ones by about 12 to 5 on the New York Stock Exchange, and volume soared to 213.98 million shares, the highest since mid-September.

Analysts said investors were becoming buyers again based on hopes for lower interest rates and because some third-quarter corporate earnings reports provided pleasant surprises.

Trading had opened on a weak note after IBM’s announcement that its third-quarter profit was down 85% from a year ago. But the report was within market expectations, and IBM rebounded to close up 3 at 104 1/4.

Meanwhile, General Electric jumped 2 3/8 to 70 after it reported slightly higher third-quarter earnings.

And brokerage stocks roared on strong earnings reports from several major firms in that industry, including Merrill Lynch.

Those reports helped overcome market disappointment after Citicorp announced a huge loss and suspended its stock dividend.

Meanwhile, investors continued to pour into smaller stocks, pushing the NASDAQ composite index up 8.45 points to a record 534.11.

Analysts said the overall rally was impressive, but that short-covering and program trading helped drive up prices.

“If there was a shift in (investor) psychology, you’d see two or three days back-to-back of very strong breadth or volume,” said Kenneth Spence, chief technical analyst at Salomon Bros. He added: “What people are continuing to hope for are further discount rate cuts by the (Federal Reserve) to get the economy moving.”

Among the market highlights:

* Brokerage stocks stole the spotlight. Merrill Lynch, where profits surged 248% in the third quarter, jumped 3 1/4 to 51 3/8. Paine Webber, whose earnings quadrupled, was up 4 1/8 to 28 5/8. Elsewhere, Morgan Stanley surged 4 1/2 to 54 3/4, and Schwab rose 2 5/8 to 34.

* While Citicorp slid 7/8 to 12 3/4 on its earnings report, most other banks jumped on the belief that their loan problems are peaking. Wells Fargo gained 3 7/8 to 71 1/4 despite reporting a lower profit. Among S&Ls;, Great Western rose 1 1/4 to 17 1/8 on a higher earnings report, pulling up rivals Glenfed, up 7/8 to 7 1/4, and CalFed, up 1/2 to 3 3/4.

Other winners included BankAmerica, up 2 1/8 to 42 1/4; Manufacturers Hanover, up 1 7/8 to 29 1/4, and First Interstate, up 1 3/4 to 30.

Analysts said investors were drawn to financial stocks on the expectation that many of the remaining companies have proved that they will be survivors in the 1990s. (Related stories, A1, D1, D3.)

* In the drug group, American Home Products stunned analysts with a 20% earnings gain. Its stock shot up 4 3/8 to 74. Elsewhere, Lilly rose 1 7/8 to 78 1/2, and Warner Lambert gained 1 3/4 to 72.

Biotech stocks also continued to surge, led by Amgen, which rose 3 to a new high of 61 3/4, and Immunogen, up 3 1/8 to 18 7/8.

* Among industrial and defense stocks, McDonnell Douglas hit a high of 70 1/8, up 2 1/2. Emerson Electric added 1 1/8 to 49, chemical firm W.R. Grace rose 1 3/8 to 37 1/8, and industrial supplier Parker-Hannifin was up 1 3/8 to 28.

* Smaller stocks were led higher by such issues as Dreyer’s Grand Ice Cream, up 2 to 28 3/4; Tekelec, up 7/8 to 17 3/8; Occupational Urgent Care, up 2 3/4 to 23, and Vans, up 3/4 to 18 3/4.

Overseas, the Nikkei average closed at 24,307.65, up 446.98 points or 1.9%, on the Tokyo exchange.

London stocks recouped earlier losses to end marginally higher. The Financial Times 100-share index was up 2.2 points at 2,576.7.

In Frankfurt, the DAX index rose 14 points to 1,585.04.

Credit

The price of the Treasury’s 30-year bond dipped early on, but rallied to close up 9/32 point, or $2.81 per $1,000.

The bond’s yield, which moves in the opposite direction from price, fell to 7.86% from 7.88% Friday in New York. The bond market was closed Monday for Columbus Day.

The Big Three domestic auto makers said their combined vehicle sales fell a lower-than-expected 14.3% in the first 10 days of October. The report added to a long list of signs pointing to a weak economy and seemed to boost the likelihood that the Federal Reserve will move soon to cut interest rates again.

The federal funds rate, the interest on overnight loans between banks, rose to 6% from 5% Friday.

Currency

The dollar rose as currency traders grew less certain about future world interest rate trends than their bond market counterparts.

The dollar had fallen recently amid evidence of U.S. economic weakness--signs that the foreign exchange markets believed would prompt the Federal Reserve to cut interest rates.

But the Fed’s inaction so far gave some dollar traders hope that rates will remain where they are in the United States, supporting the dollar.

The dollar rose to 1.713 German marks in New York from 1.702 Monday and to 130.10 Japanese yen from 129.90.

Commodities

Oil prices shot up, entering territory unseen for nearly two years except during the market convulsions of the Gulf crisis.

Crude oil futures rallied on the New York Mercantile Exchange on mounting fears that reduced exports from the Soviet Union will lead to tight supplies this winter.

Light, sweet crude for delivery in November settled at $23.86 per barrel, up 40 cents.

“Crude oil’s out of sight,” said Mike Doyle, editor of Computer Petroleum Corp. in St. Paul, Minn.

With the exception of the wild price swings brought on by Iraq’s invasion of Kuwait last year and the subsequent war, oil had not closed in that range since Jan. 3, 1990, when the final price was $23.68, Merc records show.

“People are still very concerned about cold weather, supplies in Western Europe,” said Ed Kevelson, an oil trader at Dean Witter Reynolds Inc. “How high can it go? I don’t know.”

Elsewhere, gold and silver futures slipped on New York’s Commodity Exchange. Platinum futures posted steeper losses on the New York Merc on hints that Soviet platinum reserves may be higher than previously thought.

November gold fell $1.20 to $358.50 an ounce; December silver dropped 1.5 cents to $4.08; January platinum fell $4.90 to $369.30.

Market Roundup, D8