NEW YORK -- U.S. stocks rallied yesterday after a handful of large companies reported profits that surpassed expectations.
The Dow Jones industrial average rose 18.50 to 3,936.04 as companies including Digital Equipment Corp., Johnson & Johnson, Compaq Computer Corp. and MCI Communications Corp. reported profits that beat Wall Street forecasts.
"What's fueling this rally is the same thing that's been fueling the market for years: the positive outlook for earnings and a permissive inflation environment," said Alfred Goldman, director of technical research at A. G. Edwards & Sons in St. Louis.
xTC The Dow industrials were led higher by shares of Aluminum Co. (( of America, International Business Machines Corp. and Procter & Gamble Co. The average rose to its highest level in a month.
Among broader market measures, the Standard & Poor's 500 index rose 2.62, to 470.28. Shares of manufacturers of semiconductors and computers paced the advance.
Shares of computer makers rallied as Compaq and Digital reported better-than-expected profits. Compaq earned 75 cents a share in the third-quarter, up from 42 cents a year ago and about 1 cent above analysts' forecasts. The stock rose $1.125, to $36.625.
Digital shares gained 50 cents to $29.875 after the computer maker said its loss for the first quarter ended Oct. 1 narrowed to $131 million, or 98 cents a share, from $154 million, or $1.14, a year ago. Analysts were looking for a loss of $1.33 a share, according to Zacks Investment Research.
Amgen, a drug maker, spurted $4.0625, to $58, after reporting third-quarter earnings of 82 cents a share, up from 72 cents a year earlier. The results were 5 cents a share higher than the mean estimate of analysts polled by Institutional Brokers Estimate System.
Compaq was the most active U.S. stock, followed by Amgen, Intel, DSC Communications Corp. and Viacom Inc.
Trading was active, with 319 million shares changing hands on the New York Stock Exchange. The number of rising and declining stocks was about even.
Further erosion in the value of the dollar kept stocks lower until midday. The dollar's fall exacerbated concern that higher interest rates will be necessary to prop up the currency, pushing the yield on the benchmark 30-year Treasury bond to 7.89 percent from 7.87 percent at Tuesday's close.
The dollar's slide added to investors' conviction the Federal Reserve Board will raise rates at a Nov. 15 policy meeting.