NEW YORK -- U.S. stocks soared yesterday for a fourth straight session, buoyed by a strengthening economy, rising corporate profits, subdued inflation and low interest rates.
"We're now operating in an environment where interest rates and inflation are benign, while earnings are growing at a 20 percent rate," said Abby Cohen, market strategist at Goldman, Sachs & Co. "You can't get a much more bullish combination than that."
The Dow Jones industrial average rose 32.93 points, to a record 3,978.36, the 12th time this year that the average reached an all-time high. The average's advance was led by shares of Aluminum Co. of America and General Motors Corp.
Among broader indexes, the Standard & Poor's 500 Index gained 2.91, to a record 481.61, and the Nasdaq Combined Index rallied 3.94, to an all-time high of 800.47. It was the first time the Nasdaq closed above 800.
The Dow Jones transportation average rallied 24.39, to a record 1,858.98, and the American Stock Exchange Market Value Index closed 2.46 higher, at an all-time high of 485.68.
On the New York Stock Exchange, two stocks rose for every one that fell.
"Every day we're reaching new milestones," said James Solloway, research director at Argus Research Corp. "The question now is how much higher can we go."
The Dow industrials are up 10 percent in three months, and up 6 percent already this year. "That's a tremendous run and raises more and more concerns about whether we're near a top," Mr. Solloway said.
The danger is probably minimal as long as interest rates stay low and the economy continues to strengthen, Mr. Solloway said. With the yield on the benchmark 30-year Treasury bond hovering at 6.2 percent, investors will continue to choose stocks rather than invest in low-yielding fixed-income securities, he said.
Meantime, the economy is getting stronger. The Commerce Department reported Friday that the economy expanded at a 5.9 percent rate in the fourth quarter, the fastest pace in six years. The report also said a key inflation measure rose at a 1.3 percent annual rate in the quarter, the lowest since 1967.
The economic optimism was reflected yesterday in shares of aluminum producers and automakers. "Automobile and aluminum stocks led the market," said Eugene Peroni, market analyst at Janney Montgomery Scott Inc.
Shares of aluminum companies rallied after the world's largest aluminum-producing countries approved a plan that could lead to a 10 percent cut in world output, European Union officials said.
Alcoa shares surged $2.375, to $79.125; Alcan Aluminium Ltd. gained $1.375, to $24.50; and Reynolds Metals Co. rose $2.125, to $53.375.
Shares of automakers rallied after the chief executive of General Motors Corp., John Smith, hinted that GM's 1993 earnings beat the company's goal, the New York Times reported. GM rose $2, to $61.25; Ford gained $1.75, to $67; and Chrysler climbed $1.625, to close at $61.50.
Stocks also received a boost from yesterday's strong performance in the Japanese stock market. The Nikkei 225 Index rose 1,471.2, or 7.8 percent, to 20,229.12 triggered by parliament's weekend passage of a political reform package.
Japan OTC Equity Fund Inc. rallied $2, to $14.50. Japan Equity Fund rose $1.625, to $17.875.
Xerox Corp. soared $5.50, to $98.125. The maker of copier
machines said fourth-quarter earnings from operations totaled $2.07 a share, the same as a year ago. The results were above analyst expectations of $1.95 a share, according to Institutional Brokers Estimate System Inc.
Trading was active, with about 322.8 million shares changing hands on the Big Board. The NYSE started 1994 with the heaviest trading activity in its history. Total share volume for January surpassed the previous record of 6.09 billion shares set in October 1987, and the dollar value of trading exceeded October 1987's $219.47 billion.