NEW YORK -- U.S. stocks rose yesterday for a third day as optimism about stable interest rates offset concern about slowing profit growth in 1995.
Shares of health-care, consumer products and drug companies, whose earnings are less sensitive to swings in the economy, were among the biggest gainers. Technology issues also rallied, helping to temper a drop in aluminum and auto stocks.
"It's kind of ironic that news of a slowdown in the economy is helping stocks," said James Oberweis, president of Oberweis Asset Management in Aurora, Ill., which manages about $135 million. "But if interest rates aren't going to rise like they did last year and earnings continue to grow well, then we'll be looking at higher stock prices."
The Dow Jones industrial average rose 9.09, to 3,937.73, its highest since 3953.88 on Sept. 15 and its fifth straight gain. On Friday, the 30-stock average surged 57.87. Gains in Procter & Gamble Co., Walt Disney Co. and Chevron Corp. were offset by losses in Aluminum Co. of America, Boeing Co. and Sears, Roebuck & Co.
Among broader market averages, the S&P; 500 index rose 2.49, to 481.14, nearing its all-time high of 482 on Feb. 2 last year. The Nasdaq composite index, laden with technology issues, gained 6.79, to 778.85 -- its highest since 783.45 on March 25. Shares of Microsoft Corp., Amgen Inc., MCI Communications Corp. and Cisco Systems Inc. rose the most.
Shares of American Home Products Corp. climbed $1.75, to $71.75; Abbott Laboratories gained $1, to $35.625; Merck & Co. jumped 75 cents, to $40.50; Schering-Plough rose $1.375, to $78.75; and Johnson & Johnson rose 37.5 cents, to $57.75.
Shares of one drug company fell: Pfizer Inc.'s stock dropped 75 cents, to $81.25. The company is the leading candidate to launch a merger bid for Wellcome PLC, Britain's fourth-largest drug maker, London's Sunday Times reported. On Jan. 23, Glaxo PLC offered to buy Wellcome for 8.9 billion pounds ($14 billion), a combination that would create the world's largest drug company.
Banking shares rose for a second day amid optimism their profit margins won't narrow with higher interest rates, traders said. Wells Fargo & Co. surged $2.375, to $155.625; First Interstate Bancorp jumped $1.625, to $79.875; Fleet Financial Group Inc. rose 87.5 cents, to $33.25; and First Chicago Corp. added $1.375, to $49.875.
The S&P; regional banking index rose to a 4 1/2 -month high of 179.09, up 1.59. Also helping the stocks was the prospect for continued consolidation within the industry. Michigan National Corp. shares soared $12.875, to $101.625, after National Australia Bank offered to buy the Farmington Hills, Mich.-based bank for $1.56 billion, or $110 a share.
Advancing stocks outpaced decliners by about four-to-three on the New York Stock Exchange, where about 326 million shares traded hands. On Friday, 441 million shares traded on the NYSE, good for the sixth-most-active day in exchange history.
The Russell 2000 index of small-capitalization stocks rose 1.66, to 252.44; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, gained 25.76, to 4,740.98; and the AMEX market value index added 0.69, to 443.12.