Dow Springs to Life With Late 75-Point Rally

A late rally Monday led the Dow Jones industrial average to its best one-day jump in more than three months, as technology stocks continued to bounce back and investors grew more confident that the Federal Reserve will leave interest rates alone for now.

The Dow industrials rose 75.35 points to 5,729.98, shooting higher in the last hour for their biggest advance since a 98-point gain on March 18.

Broader measures of blue-chip and large-company stocks also rallied into the close, while the technology-laden Nasdaq market erased a big chunk of its recent slide for the third straight session.

The day began with a series of conflicting economic signals that provided few leads for a market that’s been handcuffed by worries that an inflation-leery Fed will move to slow business activity by raising interest rates.

But many analysts concluded that when the central bank’s policymakers convene today for a two-day meeting, there won’t be enough ammunition to justify a rate hike.

“The market’s very happy with what’s coming down, not least of which is that the Fed seems less likely to do anything this week,” said Joe Battipaglia, market strategist at Gruntal & Co.

He also noted that some of the day’s news, including signs of manufacturing strength in a National Assn. of Purchasing Management survey, could mean stronger company earnings in the second half of 1996.

That survey helped push the yield of the Treasury’s main 30-year bond up to 6.91% from 6.89% late Friday.

Advancing issues outnumbered decliners by a 4-to-3 margin on the New York Stock Exchange, where volume totaled 345.72 million shares as of 4 p.m., down considerably from Friday’s end-of-quarter pace.

The NYSE’s composite index rose 2.50 points to 361.70, and the Standard & Poor’s 500-stock index rose 5.25 points to 675.88.

The Nasdaq composite rose 12.43 points to 1,197.45, the index’s third straight gain of more than 12 points. In those three sessions, the Nasdaq has erased more than half of a nearly 100-point, three-week slide on worries about poor profits in the computer industry.

In economic news, the Commerce Department reported that consumer spending jumped 0.8% to $5.15 trillion in May, the steepest advance in three months and double the increase in personal incomes. But the agency also said construction spending declined 0.9% in May, the first drop in three months.

“As people dissect the purchasing managers report and the other economic numbers, we go back to fundamentals: There’s been no real change in the inflation outlook,” said Peter Cardillo, director of research at Westfalia Investments.

This week, investors also will see new data on May’s factory orders and June employment levels.

Among market highlights:

* IBM was one of the Dow’s biggest gainers, rising 2 1/2 to 101 1/2, Motorola rose 1 3/4 to 64 1/2 and Compaq Computer rose 7/8 to 50.

Among the Nasdaq’s technology bellwethers, Intel rose 1 11/16 to 75 1/8; Cisco Systems rose 1 3/4 to 58 3/8; and Microsoft rose 1 3/16 to 122 5/16.

* The Dow’s biggest gainers were cyclical issues that would tend to benefit most from the production uptick indicated by the purchasing managers report. DuPont rose 3 to 82 1/8; Boeing rose 2 3/4 to 89 7/8; and 3M rose 2 3/8 to 71 3/8.

* Rail stocks were bolstered by speculation that the government will give a green light to the proposed $5.4-billion merger of Union Pacific Railroad and Southern Pacific Rail, clearing the way for other deals in the industry, Battipaglia said. The Dow Jones transportation index surged 1.54% on the session.

* ADT soared 3 7/8 to end at 24 1/8 after the company signed a definitive agreement to merge with Republic Industries in a deal valued at $5 billion. ADT will become a wholly owned unit of Republic. Republic Industries fell 2 3/8 to 26 3/4.

* General Re, which agreed to buy National Re for about $53 a share in cash or stock, rose 2 1/4 to 154 1/2, while National Re gained 13 5/8 to 51 3/8.

Overseas, Tokyo’s Nikkei stock average fell 0.3%, and Frankfurt’s DAX index rose 0.1%, and London’s FT-SE 100 rose 0.4%.

Mexican stocks closed lower Monday, driven down sharply in early trade as investors reacted to news that a new armed rebel group appeared over the weekend in the southwestern state of Guerrero. The Bolsa index of 37 leading stocks closed down 33.18 points, or 1.03%, at 3,177.65 points.

Market Roundup, D8