NEW YORK -- U.S. stocks posted modest gains yesterday amid confidence that corporate earnings will continue to expand in 1995.
Gains in automakers such as General Motors Corp. and Chrysler Corp. and entertainment stocks such as Walt Disney Co. outweighed losses in Coca-Cola Co., bank and financial issues.
"The outlook for the next six to 12 months is good," said Donald Smith, president of Donald Smith & Co. in Paramus, N.J., which manages about $500 million. "People are going to be surprised ** at some of the earnings power of the cyclical stocks," such as auto and steel issues, companies whose business rises and falls as the economy grows and contracts.
The Dow Jones industrial average rose 13.12, to 3,814.92, extending Wednesday's 34.65-point rally, paced by gains in GM, Disney, AT&T; Corp. and AlliedSignal Inc.
Among broader market indexes, the Standard & Poor's 500 index inched ahead 0.07, to 459.68, and the Nasdaq combined composite index rose for a third day, gaining 2.22, to 739.34. Oracle Systems Corp., Tele-Communications Inc., Cisco Systems Inc., DSC Communications Corp. and Intel Corp. all rose.
More than 12 stocks fell in price for every 11 that advanced on the New York Exchange, where volume fell to 340.3 million shares from 378.8 million Wednesday.
"The economy seems to be still pretty strong," Mr. Smith said. The Commerce Department yesterday raised its estimate of third-quarter growth in gross domestic product to an annual rate of 4 percent, more than expected.
Auto stocks rallied as Chrysler said sales at its Jeep-Eagle division climbed to a record 479,801 units so far in 1994 and as CS First Boston began research coverage on Ford Motor Co. with a "buy" rating. Chrysler jumped $1.25, to $48.125; GM gained $1.25, to $39.125; and Ford added 12.5 cents, to $26.75, after rising as much as 50 cents.
AlliedSignal Inc., whose auto parts division accounts for 38 percent of sales and 33 percent of earnings, rose 87.5 cents, to $35.125.
Disney climbed $1.125, to $46, its highest since late last march. The film studio and theme-park operator was cited as a favorite of Bank of Boston Corp. money manager Edward Riley in the Wall Street Journal.
GE, which last week raised its dividend 14 percent and announced a $5 billion stock buyback program, rose 75 cents, to $50.625.
Among the stocks that declined was Coca-Cola Co., which sank $1.75, to $51. The company's 30 percent stake in Mexico's Coca-Cola Femsa SA slumped in value along with other Mexican stocks after that country devalued its currency 13 percent Tuesday, then abandoned all efforts at protecting the currency. So far this week, the peso has declined 29 percent against the dollar.
Coca-Cola Femsa American depositary receipts dropped $2.625 yesterday, to $23.25.
Citicorp, BankAmerica Corp. and other leading banks fell amid concern earnings will be hurt by a weaker Mexican peso, analysts said.
"Anybody with Mexico exposure is going to take it on the chin," a trader at NatWest Securities said.
Citicorp dropped $2, to $41.25; BankAmerica declined 62.5 cents, to $39.875; Chase Manhattan Corp. fell 75 cents, to $34; Chemical Banking Corp. dipped 12.5 cents, to $36.625; NationsBank Corp. sank $1.125, to $44.50; and Bank of Boston Corp. slid 75 cents, to $26.75.
First Chicago Corp. slipped $1.25, to $46.75, and First Interstate Bancorp dropped $1, to $68.50.