Drug rally spurs stocks Dow rises 8 Nasdaq index up 3, to record level


NEW YORK -- U.S. stocks closed higher yesterday, as a rally in shares of drug companies helped offset concern about lower-than-expected earnings at Intel Corp.

"Intel's financial report fueled a slump among semiconductor stocks, but the overall market gained ground," said Edward Laux, head trader at Kidder, Peabody & Co.

The Dow Jones industrial average rose 8.67 points, to 3,593.41, led by shares of Philip Morris Cos. The Standard & Poor's 500 Index gained 0.57, to 460.88, and the Nasdaq Combined Composite Index closed 3.38 higher, at a record 767.65.

Trading was slow because banks and government offices were closed for Columbus Day. On the New York Stock Exchange, about 183 million shares changed hands, the smallest volume this year.

About eight common stocks advanced for every seven that declined on the Big Board. The American Stock Exchange Market Value Index rose 2.89, to a record 467.59.

Intel's stock slumped $4.75, to $65.50, after the company reported third-quarter earnings of $1.33 a share. The results were far above last year's earnings of 56 cents a share but below analysts' estimates.

"Anything less than $1.40 [a share] was seen as a disappointment," said Raj Rajaratnam, an analyst at Needham & Co.

The slump in Intel's stock hurt other semiconductor stocks. National Semiconductor Corp., for example, fell $1.125, to $18. The S&P; Semiconductor Index declined 8.97, to 190.53.

"The semiconductor industry has been a mainstay for this market," said Thom Brown, managing director at Rutherford, Brown & Catherwood Inc. "If semiconductor stocks start to falter, that could have a negative effect on the entire market."

Semiconductor stocks fell last week on signs a price war might be heating up. The S&P; Semiconductor Index dropped 2.7 percent, led by a slump in Advanced Micro Devices Inc., which lost almost 20 percent of its market value after it reported lower-than-expected earnings.

Eli Lilly, battered by stagnating prices for prescription drugs, announced plans to eliminate 4,000 jobs, or 12.5 percent of its work force, and discontinue some cancer research. Eli Lilly rose $3.50, to $53.625, on the report.

Bristol-Myers Squibb Co. rose $1.75, to $57.875; Pfizer Inc. gained $1, to $60.375; and Warner-Lambert Co. advanced $2.25, to $68.25.

Shares of generic drug companies surged after Hoechst Celanese Corp. agreed to acquire a 51 percent stake in Copley Pharmaceutical Inc. for $546 million.

Copley's stock fell $2.875, to $46.875, but Zenith Laboratories Inc. rose $4.25, to $81.375; Purepac Inc. increased 37.5 cents, to $23.125; Marsam Pharmaceuticals Inc. gained $1.875, to $25.125; and Roberts Pharmaceutical Corp. advanced $2.25, to $35.50.

Seth Glickenhaus, senior partner at Glickenhaus & Co., said he expects the stock market to hover at current levels unless long-term interest rates turned higher.

The government bond market was closed yesterday for the Columbus Day holiday. The yield on the benchmark 30-year Treasury bond was 5.92 percent on Friday, the lowest level in 20 years.

The low level of interest rates means more money is going to funnel into the stock market, where the hopes of higher returns exist, said Mr. Glickenhaus, who manages about $2 billion in investments.

Intel, U.S. Healthcare Inc., Tele-Communications Inc., Philip Morris Cos. and Synoptics Communications Inc. were the five most actively traded issues on the U.S. Composite.

U.S. Healthcare declined $3.25, to $43.875, after Goldman, Sachs & Co. removed the stock from its "recommended" list. Philip Morris rose 87.5 cents, to $49.125, after a Morgan Stanley & Co. analyst repeated his "buy" rating on the stock.

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