NEW YORK -- U.S. stocks closed higher yesterday, as confidence in the economy was bolstered by expectations the North American Free Trade Agreement would pass and a report of better-than-expected semiconductor sales for October.
The market also got a boost from yesterday morning's consumer price report, which reinforced the notion the economy was expanding without stirring up inflation, analysts said.
"People feel that we're not going to have another dip," said Tom Henderson, manager of Lord, Abbett & Co.'s $4.1 billion Affiliated Fund. "The economy is really, solidly in an expansionary phase."
The Dow Jones industrial average jumped 23.48, to 3,663.55, led by General Motors Corp. GM rallied $2.50, to $51.125, on the combination of a better economic outlook and bullish comments from a Donaldson, Lufkin & Jenrette analyst, who raised his rating of GM to "buy" from "very attractive."
The industrial average recovered after retreating briefly in midafternoon, when the Treasury's sale of 10-year notes met with slightly less demand than expected.
Among broader market indexes, the Standard & Poor's 500 Index gained 3.37, to 463.70. The Nasdaq Combined Composite Index vaulted 6.66, to 776.51. The American Stock Exchange Market Value Index rose 0.68, to 476.70. The Dow Jones Transportation Average soared 16.03, to 1,741.39, just shy of its record close of 1,742.24, set Nov. 1.
On the New York Stock Exchange, 10 stocks rose for every seven that fell. Trading was moderate, with about 283 million shares changing hands on the Big Board.
Semiconductor, auto and retailing shares rose the most yesterday.
Computer chip makers rallied after the semiconductor industry's trade association said its book-to-bill ratio, a measure of demand, registered 1 in October, down from 1.01 in September but above analysts' estimates for a decline to as low as 0.95. A reading of 1 means chip makers received $100 of new orders for every $100 of product shipped.
Intel Corp. added $2.50, to $63.50; Motorola Inc. soared $3.125, to $102.875; Advanced Micro Devices Inc. gained 75 cents, to $19.625; and Texas Instruments Inc. soared $4, to $63.125. National Semiconductor Corp. climbed $1.75, to $17.875; Dallas Semiconductor Corp. closed 75 cents higher, at $15.75; and Micron Technology Inc. leapt $4.125, to $44.125.
Personal computer hardware and software makers also got a boost from the book-to-bill report. Compaq Computer Corp. surged $2.25, to $68. Microsoft Corp., which was raised to an "above average" investment by a Merrill Lynch & Co. analyst, jumped $3.125, to $81.375.
Semiconductor sales are considered a barometer of economic activity, because chips are built into a range of products from computers to telephones and autos.
Retailing shares advanced, meantime, in the wake of Tuesday's strong earnings from Wal-Mart Stores Inc., the nation's largest .. retailer. Also, a survey by Johnson Redbook Service showed U.S. retailers' sales in the first week of November rose 1.7 percent from a month ago and 10 percent from a year ago.
Wal-Mart closed up 75 cents, at $29.375; Circuit City Stores Inc. rose $1.625, to $27.875; and Home Depot Inc. went up $1.375, to $41.875.
The prospects for NAFTA's ratification brightened after last night's televised debate between Vice President Al Gore and Texas businessman Ross Perot, the proposed treaty's most visible critic, traders and analysts said.
"I watched the debate last night, and I think Perot got his clock cleaned," said Mr. Henderson of Lord Abbett. "I don't think passage of NAFTA is a lead-pipe cinch, but I would give it a thin margin in favor."
Given the expected boost to trade, investors view passage of NAFTA as positive for the stock market overall and manufacturing companies in particular, traders said. The House
of Representatives is scheduled to vote on the agreement Nov. 17.
Besides strong semiconductor sales, yesterday's report showingsubdued inflation also helped the stock market, traders said.
The Labor Department said consumer prices rose 0.4 percent in October, reflecting a higher gasoline tax, and were up 0.3 percent after food and energy prices were stripped out. The figures were in line with economists' expectations.
Optimism that the economic recovery won't stir up inflation prompted investors to overlook a rise in long-term interest rates, traderssaid.
The yield on the benchmark 30-year bond rose to 6.20 percent from 6.14 percent late Tuesday. Bond prices plunged -- raising yields -- amid weak demand at the Treasury's 10-year note auction and concern that inflation could pick up in the future.
US West Inc., Telmex ADRs, Intel, RJR Nabisco Holdings Corp. and GM were the most actively traded stocks on the U.S. composite list.