NEW YORK -- Stocks rallied yesterday for a second straight day amid the release of better-than-expected corporate earnings and a growing perception that a Clinton administration would not be as bad as earlier feared.
"We got some good earnings news, and people are beginning to realize that no matter who wins the presidential election, the economy is going to get better next year," said Richard Unruh, head of the equity division at the Delaware Group.
The Dow Jones industrial average rose 27.01, to 3,201.42. The index is up 64.84 points, or 2.1 percent, in the past two days. But the Dow is still 6.2 percent below its record closing high of 3,413.21, set June 1. Yesterday's rally was led by Caterpillar, Allied-Signal, Philip Morris and International Paper Co., which accounted for more than half the index's gain.
Advancing stocks outnumbered declining issues by 8 to 5 on the New York Stock Exchange. Trading was moderate, with about 187 million shares trading on the Big Board. Standard & Poor's 500 index gained 1.86, to 409.30. The NASDAQ Combined Composite index rose 2.60, to 576.44.
Stocks received a boost from positive earnings surprises from some big companies, like Microsoft, PepsiCo, PaineWebber Group, Merrill Lynch & Co., Sprint and Rubbermaid.
"We definitely got some good earnings news," said John Conlon, a managing director at Rothschild Inc. "The question now is whether third-quarter earnings will exceed expectations."
The market also advanced on expectations that the Federal Reserve still might lower interest rates. Alan Greenspan, the Fed chairman, disputed reports last weekend that the central bank has put off until after the Nov. 3 election any possibility of cutting interest rates to invigorate the sluggish economy.
Some analysts said they are not surprised by the stock rally. Barton Biggs, Morgan Stanley & Co.'s director of global research, strategy and economics, called stocks "very oversold" and said the stage is set for a big rally.
"People turned almost irrationally bearish last week as the Dow fell more than 60 points to a 1992 low," said Mr. Unruh, who helps manage about $15 billion in equities.
But it is unlikely, Mr. Unruh said, that stocks will rise much further. Lingering concerns about the economy, the weak dollar and high interest rates in Europe, he said, will prevent a big stock rally.
The rise in stocks yesterday was led by shares of beverage, tobacco, drug and automobile companies. Southland, Merck, Intel, Microsoft and Philip Morris were the five most actively traded stocks.