As cable issues rally, stocks finish mostly higher Dow up 10 Doubts about profits, rates temper gains


NEW YORK -- Stocks closed mostly higher yesterday as takeover speculation in the media industry sent investors scrambling for cable-TV stocks. Enthusiasm for the cable issues offset a decline in utility issues and concern about weaker corporate earnings and potentially higher interest rates.

The Dow Jones industrial average gained 10.06 points, to 3,603.19. Entertainment, media, publishing and electrical-equipment stocks led the advance after Bell Atlantic Corp. announced that it would buy Tele-Communications Inc. and Liberty Media Corp. The merger, one of the largest ever, "could really be a spark for this market to turn on," said Alan Ackerman, executive vice president at Reich & Co.

"This looks like a season for deals and mergers and acquisitions," he said. "People are going to start to see who mixes with whom. It doesn't mean the market itself will roar to a new high; it just means people will play the 'what-if' scenarios and see where the value is."

The rush for cable-television stocks countered a slide in oil and semiconductor shares and drove up the Nasdaq Combined Composite Index 6.51, to 778.97, the third straight Nasdaq record.

The Standard & Poor's 500 Index advanced 0.37, to 461.49. The American Stock Exchange Market Value Index hit a record 475.85, up 5.35.

Declining common stocks outnumbered advancing issues by a slight margin on the New York Stock Exchange. Volume was active, with about 291 million shares changing hands.

On Nasdaq, more than four stocks rose for every three that declined. Some investors said they were skeptical about the Nasdaq rally. "I don't see the fundamentals that should justify" the record gains in Nasdaq stocks, said John Dorian, managing director with $2 billion in assets at First Quadrant Corp. in Pasadena, Calif.

Mr. Dorian said he is "looking for more negative than positive surprises" in third-quarter earnings. "The economy is too sluggish to justify these optimistic expectations," he said.

Stocks also face a "risk of higher interest rates when we truly realize the cost" of President Clinton's health care package, Mr. Dorian said.

The Bell Atlantic merger agreement sent cable-television stocks higher and most regional telephone companies lower. The merger "means that the rewiring of America is for real," and its size is "absolutely mind-boggling," said Jon Groveman, president Ladenburg, Thalman & Co.

Among cable companies, Tele-Communications jumped $3, to $31.375; Liberty Media climbed $2.625, to $29.25; Cablevision Systems Corp. soared $9.25, to $63.625; Comcast Corp. spurted $6.375, to $39.625; and Adelphia Communications Corp. rose $3.75, to $23.75.

Regional phone stocks were mostly lower, with the striking exception of Bell Atlantic, which soared $5.875, to $65.875. Southwestern Bell Corp. fell 87.5 cents, to $40.125; Nynex Corp. dropped $1, to $43; BellSouth Corp. dropped 75 cents, to $57.25; and Ameritech Corp. fell 75 cents, to $83.75.

If the pace of mergers and acquisitions accelerates, "that's going to add to the perception that there's a little bit more value" in stocks, said Jim Benning, equity trader at BT Brokerage.

The broader market was largely stalled, Mr. Benning said, because "the economy's doing all right, but it's not doing gangbusters, and unless the economy picks up steam, the only thing that will help the market is exceptional earnings."

Investors are also concerned that a recent slide in utility stocks may signal that interest rates are about to head higher, said Dan Marciano, senior vice president in equity trading at Dillon, Read & Co. The Dow Jones utilities average fell 1.25 yesterday, to 240.51, and it has fallen 6 percent since hitting a record on Sept. 13.

Utilities might be "telling us rates are going to go higher, and the rest of the market hasn't caught on yet," Mr. Marciano said, or investors may be selling utilities to buy faster-growing stocks.

In either case, said Robert Walberg, equity analyst at MMS International, stocks are in trouble. Utility stocks fell below their 200-day moving average yesterday, a bearish signal. A peak in utility stocks, he said, typically comes three to six months before a wider sell-off.

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