Stocks mixed, but Dow reaches 3,652


NEW YORK -- The Dow Jones industrial average closed at another record high yesterday, but stocks as a whole were mixed, as strength in oil and telephone issues was undercut by a slump in Philip Morris Cos. and health-care stocks.

The Dow rose 13.13 points, to 3,652.09, its sixth record in the past seven sessions. AlliedSignal Inc., Goodyear Tire & Rubber, American Telephone & Telegraph Co. and Texaco Inc. led the advance.

The Standard & Poor's 500 Index gained 0.36, to a record 460.13, breaking Tuesday's high of 459.77.

The Nasdaq Combined Composite Index retreated 1.48 from Tuesday's record to close at 733.66, hurt by concerns that Borland International Inc.'s price cuts would squeeze profits at computer software companies.

Other market measures broke records set Tuesday. The Dow Jones utilities average soared 1.65, to 254.55, surpassing Tuesday's high of 252.90. The New York Stock Exchange Composite Index rose 0.20, to 255.35, and the American Stock Exchange Market Value Index added 1.22, to 454.42.

The Dow Jones transportation average, buoyed by airline stocks, surged 14.96, to 1,664.67, though still below its record high of 1,683.08, set April 16.

The rally in stocks is being driven by low interest rates, with investors perceiving equities to be attractive relative to fixed-rate instruments. In addition, expectations that Germany's central bank, the Bundesbank, will cut interest rates when it meets today drove up share prices in British and French markets to record levels.

"It's part of the overall picture," said Philip Smyth, an analyst at Birinyi Associates. "World markets are doing well, not just the U.S. If anything, we're kind of the laggard here this year."

The 30-year bond dropped to a record-low yield of 6.17 percent yesterday, down 2 basis points.

The rally is feeding on itself, as short-sellers who had sold stocks with the idea of profiting from a market fall are being forced to buy back shares to avoid further losses. "I think there's a lot of that" happening, Mr. Smyth said.

Advancing stocks exceeded declining issues by about 9-to-7 on the New York Stock Exchange. Trading was extremely active, with 301.6 million shares changing hands.

Philip Morris sank $2, to $49.125, after the company decided to keep its quarterly dividend at 65 cents a share, --ing investors' expectations of a dividend increase. Analysts at Merrill Lynch and Smith Barney Shearson lowered their ratings of Philip Morris.

Weakness in Philip Morris was countered by strength in AlliedSignal and oil stocks. AlliedSignal rose $1.50, to $74.625, on news of a venture with Europe's largest avionics manufacturer, Sextant Avionique, that would challenge Honeywell Inc. and Rockwell International Corp. as the world's biggest aerospace electronics company.

Texaco rose 87.5 cents, to $64.75; Exxon gained 75 cents, to $65.875; and Chevron Corp. added 50 cents, to $91.875.

Oil stocks benefited from expectations of stronger fourth-quarter earnings, above-average dividend yields and positive comments about the industry's outlook from a Goldman, Sachs analyst, who raised his rating of Texaco to "trading buy."

"Oils are one of the few areas with dividend yields, and they're perceived as safe," said Grace Messner, who manages $170 million for Wilmington Trust.

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