Dow, Bonds Lap Up Economy News
Blue-chip stocks marched to record highs for the third time this week as interest rates fell Thursday amid signs of a moderating economy that might keep inflation under control.
The Dow Jones industrial average rose 38.39 points to 6,059.20, down slightly from a 45-point gain earlier in the day. The Standard & Poor’s 500 list also notched its third new high this week.
The technology-dominated Nasdaq market retreated, however, pressured by more profit taking in computer industry names whose shares had rallied in advance of this week’s strong earnings reports.
With few eye-catching earnings reports like those that dominated the last two sessions, many investors focused on consumer product concerns such as Merck, Procter & Gamble and Philip Morris, whose fairly reliable revenues are looking increasingly attractive with each new hint of a moderating economy. Merck, up 2 7/8 at 74 7/8, was the Dow’s biggest gainer, benefiting from a brokerage upgrade prompted by the drug maker’s better-than-expected earnings report on Wednesday. Procter & Gamble was up 1 1/2 to 97 1/2, and Philip Morris up 1 1/2 at 97 3/8.
The government reported that construction of new homes and apartments fell 6% last month to the lowest level of 1996, and that industrial production inched up just 0.2%.
Bond yields fell on the news, which reinforced other recent indications that robust demand is easing. The yield on the 30-year Treasury bond--a key determinant of corporate and consumer borrowing costs--fell to 6.80% from Wednesday’s 6.85%.
The stock market’s gains came as the ninth anniversary of Black Monday looms. On Oct. 19, 1987, the Dow plummeted 508.00 points, or 22.61%.
Advancing issues outnumbered decliners by nearly 3 to 2 on the New York Stock Exchange, where volume was heavy at 478.55 million shares, up from 441.41 million on Wednesday.
Among Thursday’s highlights:
* Struggling Apple Computer, which late Wednesday stunned investors by reporting an unexpected $25-million fourth-quarter profit after posting heavy losses earlier in the year, rose 5/8 to 26 3/8.
* Iomega announced it will abandon the Nasdaq Stock Market for a listing on the New York Stock Exchange, archrival to the Nasdaq, becoming the latest of a record number of companies switching to the Big Board. Iomega is the 65th Nasdaq company to move to the NYSE so far this year, surpassing the previous record of 62 set in all of last year. The Utah-based maker of computer disk drives joins other fast-growing computer-related firms such as America Online and Bay Networks.
The announcement came as Iomega reported it earned $12.8 million in the third quarter ended Sept. 29, six times more than the $2.03 million it earned in the same period a year ago.
Some companies move to the NYSE as their sales and profits grow. About 12% to 15% of Nasdaq companies that are eligible to list on the Big Board do so every year, the NYSE said.
Iomega fell 2 63/64 to 22 7/8.
* Among large technology stocks, Intel lost 1 7/8 to 110 3/4 and Oracle was off 3/4 to 43 3/4. Microsoft fell 2 1/2 to 135 1/2.
* PepsiCo rose 5/8 to 29 3/4 on rumors that it could be a takeover target of Philip Morris, whose stock gained 1 1/4 to 97 3/8. Company executives declined to comment.
* General Instrument lost 4 1/2 to 22 3/8 after reporting third-quarter earnings that fell short of expectations. The company also warned that its fourth-quarter and 1997 earnings will be disappointing.
* Among initial public offerings, Metro Networks, a provider of traffic reports and local, sports and weather news to television and radio broadcasters, surged to 20 1/2 from its $16-a-share pricing.
Overseas, Tokyo’s Nikkei stock average rose 0.1%, Frankfurt’s DAX index rose 0.1% and London’s FTSE-100 rose 0.4%.
