Stocks in Broad Rise; Key Indexes Hit Highs

From Times Staff and Wire Reports

Broad stock market measures hit new highs Thursday amid heavy buying of drug and tobacco issues, although the Dow Jones industrials ended just below their record.

Meanwhile, bond yields continued to edge lower on more evidence that the economy is slowing.

On Wall Street, the Dow index gained 58.35 points to 7,777.06, closing under its peak level of 7,782.04 set one week ago.

The Dow rose as high as 7,810 before falling back in late trading--despite a bullish pronouncement from an oft-quoted Wall Street forecaster.


But the broad market was undaunted. The Standard & Poor’s 500 index jumped 8.93 points to a record 897.99. The Russell 2,000 index of smaller stocks rose 4.03 points to a record 396.49.

Winners topped losers by more than 2 to 1 on the New York Stock Exchange and by 23 to 17 on Nasdaq.

“The market has a lot of life in it,” said Jack Church, chief investment officer at Glenmede Trust Co., which has $11 billion in assets. “It’s getting to be trite, but inflation continues to surprise on the downside and earnings are surprising on the upside.”

Stocks were boosted after the Commerce Department reported that the nation’s foreign trade deficit rose 7.8% in April. The gap was slimmer than economists had expected.


Meanwhile, the Labor Department reported that first-time claims for jobless benefits were up by 8,000 last week to 347,000, the highest since May 8.

Higher jobless claims support the notion that the economy is slowing--possibly erasing the need for the Federal Reserve Board to tighten credit any time soon.

The Fed meets July 1-2.

The bond market continued to rally gently, supporting stocks. The yield on the 30-year Treasury bond slipped to 6.67% from 6.68% on Wednesday and now is the lowest since late February.

Stocks also were buffeted by technical trading related to today’s quarterly expiration of key stock index futures and options contracts, analysts said.

The quarterly expiration “tends to exaggerate any kind of trend that you already have in place in the market,” said Bob Dickey, analyst at Dain Bosworth Inc.

The market’s bulls were stoked Thursday by an upbeat forecast by Prudential Securities’ well-known market analyst, Ralph Acampora, who raised his target for the Dow to 10,000 in the next year.

Acampora advised people to “remain fully invested--we expect the stock market to mount an explosive advance during the second half of the year,” he wrote in a report.


Among Thursday’s highlights:

* Spurring the Dow’s gain was Philip Morris, which climbed 2 to a record 47 1/2 on growing expectations that the tobacco industry soon will settle the massive legal challenges it faces.

Other tobacco stocks gaining included RJR Nabisco, up 1 3/8 to 35 7/8, and UST, up 3/4 to 30.

* Major drug stocks surged on optimism about strong sales growth of cholesterol-fighting drugs. Warner-Lambert rocketed 6 7/8 to 112 3/4, Merck shot up 3 3/8 to 99 3/4, Pfizer climbed 4 1/8 to 112 1/2 and Pharmacia & Upjohn rose 1 1/2 to 34 3/4. (Investor Spotlight, D8.)

* Many tech issues recovered from several sessions of declines after discouraging projections of market demand. Remedy gained 2 1/2 to 37 1/4, IBM rose 5/8 to 89 5/8, National Semiconductor jumped 1 3/8 to 31 1/4, Sun Microsystems climbed 1 3/16 to 36 3/4 and Cisco Systems gained 2 to 69.

But Adobe Systems slumped 4 1/4 to 36, continuing to slide after reporting weaker-than-expected earnings. Several analysts downgraded the software stock.

* Major airlines fell after Goldman Sachs & Co. downgraded the issues, citing a possible change in the federal airline tax. UAL declined 2 3/8 to 71 7/8, Delta dropped 1 to 88 1/4 and AMR was off 2 to 93 1/4.

In foreign stock trading, the Bangkok market tumbled 3.8% to an eight-year low after Finance Minister Amnuay Viravan offered his resignation.