NEW YORK -- U.S. stocks rallied yesterday as a decline in long-term interest rates helped push the Dow Jones industrial average to another all-time high.
The gain in stocks was further fueled by expectations that President Clinton's deficit-reduction plan would be passed by the House of Representatives, and by some big advances in computer stocks, namely International Business Machines Corp. and Intel Corp.
"Interest rates are down, and it looks like Clinton's economic plan is going to get House approval," said Richard Meyer, head of institutional trading at Ladenburg, Thalmann & Co. "That's a good combination for stocks."
The Dow Jones industrial average rose 23.53, to a record 3,540.16, eclipsing the previous high of 3,523.28.
Shares of IBM accounted for almost one-quarter of the average's gain. IBM gained $2.375, to $52.75, on a Merrill Lynch report that said the company's disk drive and personal computer businesses are improving.
The Nasdaq Combined Composite Index soared 9.05, to 704.09, closing above 700 for the first time since Feb. 5. The index's record is 708.85, set Feb. 4.
"Intel was very, very strong," said Lance Zipper, head OTC trader at Kidder, Peabody & Co. "That picked up the entire index."
Intel's stock rallied $6.75, to $110.50, after a Merrill Lynch analyst raised his 1994 estimate on the semiconductor maker by 20 percent, to $14 a share.
The Standard & Poor's 500-Stock Index increased 4.59, to 453.44, and the American Stock Exchange Market Value Index climbed 3.06, to a record 437.13.
Advancing common stocks led declining issues by about 2-to-1 on the New York Stock Exchange.
A majority of the stock market's gain took place in the final 90 minutes of trading, when the yield on the benchmark 30-year government bond fell below 7 percent, to a low of 6.93 percent.
The decline in interest rates was buoyed by the Treasury's successful sale of $11.034 billion in five-year notes and the Commerce Department's report that durable goods orders were flat in April, providing more evidence of a sluggish economic recovery.
"Reports like the durable goods number don't make investors run out and buy stocks, but interest rates are lower, and that helped the market," said Michael Metz, investment strategist at Oppenheimer & Co.
Some investors also were encouraged by reports that Mr. Clinton'sdeficit-reduction package would be passed today by the House, Mr. Metz said.
Speaker Thomas S. Foley, D-Wash., and several other House Democrats expressed confidence yesterday that the president's plan would pass. Mr. Clinton's plan is designed to reduce the deficit by nearly $500 billion by 1998 through spending cuts and tax increases.
The stock market will plunge if the president's deficit-reduction package is rejected by the House, said Chris Willox, equity trader at BT Brokerage. "If it doesn't pass, all hell breaks loose," he said.
About 279 million shares traded on the NYSE, compared with a daily trading average of 256.7 million shares over the past three months.
Spectrum Information Technologies Inc., Novell Inc., Tele-Communications Inc., British Petroleum PLC and Intel were the five most actively traded issues on the U.S. Composite.
Spectrum Information slumped $1.375, to $4. The developer of wireless transmission technologies said it and some of its executives were the subjects of several lawsuits charging they misrepresented the value of a patent-licensing agreement with American Telephone & Telegraph Co. The stock is down 66 percent in the past five sessions.
Compaq Computer Corp. rose $3, to $59.25, after the personal computer company said it took the lead in the European portable PC market for the first time.