NEW YORK -- U.S. stocks advanced yesterday amid growing optimism about the strength of the economic recovery.
The government released two reports indicating the economy was improving. The Commerce Department said the merchandise trade deficit narrowed 1.6 percent in October, while the Labor Department reported that fewer Americans filed first-time claims for unemployment benefits last week.
"The economy is clearly getting better, and that's giving the stock market a boost," said Thom Brown, a managing director at Rutherford, Brown & Catherwood Inc.
The Dow Jones industrial average rose 9.22, to 3,726.14. The average gained almost 20 points early in the session, to a high of 3,734.81.
Today is "triple-witching," when futures and options for individual stocks and indexes expire simultaneously. Trading on these days tends to be heavier because of buying and selling tied to the expiration.
The Standard & Poor's 500 Index rose 1.50, to 463.34. The Nasdaq Combined Composite Index climbed 2.56, to 755.53. The Nasdaq composite rose for a second straight day, though it is 4 percent below its record 787.42 of Oct. 15.
Five common stocks rose for every four that fell on the New York Stock Exchange. The American Stock Exchange Market Value Index climbed 1.50, to 461.44.
"In order for the market to take its next step forward, it needs to be convinced that corporate profits will be sustained," said Jon Fossel, chairman of Oppenheimer Management Corp. One way investors would be convinced is if the economy continues to expand, he said. "We'll see that proved in 1994," said Mr. Fossel, who says he expects the Dow industrials to climb to 3,900 next year.
The outlook for corporate profits was darkened this week by Eastman Kodak Co.'s announcement that 1994 earnings would be below investors' expectations. Kodak stock fell an additional $1.25, to $54.25, after plunging $7.25 Wednesday.
Investors also are closely watching interest rates. The yield on the benchmark 30-year Treasury bond rose to a high of 6.30 percent yesterday. The rise in rates was tied to a strengthening economy, which could eventually lead to an increase in the inflation rate.
The big concern about rising rates is that they make bonds and other fixed-income investments more attractive than stocks. This year more than $10 billion poured into equity mutual funds from ** certificates of deposit because of low interest rates, according to Lipper Analytical Securities Corp.
Trading was active, with about 284 million shares changing hands on the Big Board. Merry-Go-Round Enterprises Inc., Gerant Cos., Kodak, Limited Inc. and Novell Inc. were the five most actively traded issues on the U.S. Composite.
Merry-Go-Round Enterprises slumped $3.375, to $2.875, on reports that the retailer missed payments to many of its suppliers that were due last Friday. Michael Sullivan, the company's president, said Merry-Go-Round was working out a new credit plan with its lenders.
International Business Machines Corp. rose 50 cents, to $57.375, after a Merrill Lynch & Co. analyst raised his fourth-quarter earnings forecast.
Timberland Co. declined $10.25, to $52, after plunging $6.50 Wednesday. Analysts reduced fourth-quarter earnings estimates for the apparel and shoe company.
L.M. Ericsson Telephone Co. shares slumped $1.625, to $36.50, as S.G. Warburg & Co. cut its investment rating on the Swedish telecommunications company. Ericsson also was hurt by concern about a television program yesterday night on CBS that was expected to focus on "health hazards posed by cellular phones."
Nextel Communications Inc. rose $3, to $36.50, after company officials reported progress in its digital mobile-telephone system Los Angeles.
Fruit of the Loom Inc. lost $3.375, to $24.50. The company said fourth-quarter earnings would be below expectations.