NEW YORK -- U.S. stocks rose yesterday as gains in technology issues offset losses in shares of companies whose earnings rise and fall with the economy.
Shares of Intel Corp. rallied $3.625, to a record $76.625, and led the advance in technology stocks. Merrill Lynch & Co. said strong demand for Intel's top-of-the-line microprocessor will fuel earnings growth. Texas Instruments Inc., which also makes semiconductors, added $1.75, to $75; Apple Computer Inc. gained $1.50, to $42.3125; and Compaq Computer Corp. rose $1.50, to $36.875.
Stocks have advanced six of the past seven days amid signs the economy is slowing, making it less likely the Federal Reserve will raise interest rates again. Stable rates, though, probably mean economic growth has subsided, so earnings of so-called cyclical companies like automakers and aluminum producers will lag.
"The overwhelming positive is that we have weathered the high rate environment without big damage done to stock prices," said Ricky Harrington, market analyst at Interstate/Johnson Lane Inc. "But there's still a question of how the economy's slowdown will affect earnings over the next couple of quarters."
The Dow Jones industrial average fell 2.02, to 3,935.37, after being up as high as 3,953.54 earlier in the session. The 30-stock average is up 2.7 percent since Jan. 30. Shares of Aluminum Co. of America fell $2, to $78; Goodyear Tire & Rubber Co. slumped $1, to $35.875; Procter & Gamble Co. lost 75 cents, to $65.625; and General Motors Corp. slid 62.5 cents, to $38.75.
Goodyear Tire's stock fell even though the company said earnings in the fourth-quarter rose to 90 cents a share from 76 cents a year ago, beating expectations of 87 cents a share. Along with the anticipated economic slowdown, investors are concerned that rising rubber prices will erode the company's profit margins.
The Morgan Stanley cyclical index of 30 stocks fell 1.43, to 292.10. "The Fed is out to slow this economy, and cyclicals take it on the chin first," said Bill Langevin, manager of equity trading at Morgan Keegan & Co.
Among broad market indexes, the S&P; 500 index rose 0.38, to close at 481.19, just under its all-time closing high of 482, set Feb. 2 a year ago. Shares of semiconductor, telephone, retail and computer stocks rose, while health care, beverage, chemical, and auto issues fell.
The Nasdaq composite index, laden with technology stocks, rose 4.80, to 783.77 -- its highest since March 24. Shares of Intel, Amgen Inc., Microsoft Corp. and Novell Inc. rose the most.
Shares of Amgen, a biotechnology company, soared $5.375, to $70.75, amid speculation that Bristol-Myers Squibb Co. may soon announce an offer to buy the company for $90 a share. Both companies declined to comment. Bristol-Myers' stock fell $1, to $60.875.
Eleven stocks rose for every 10 that fell on the New York Stock Exchange. Composite trading volume reached 389 million shares.
Shares of computer, software and semiconductor makers rose, even though spending on capital equipment may slow from 1994, because a lot of businesses and consumers haven't yet exploited technology, analysts said. Strong overseas demand will also fuel sales this year.
Intel was named the "Focus One" stock of the week at Merrill Lynch by analyst Thomas Kurlak, who cited optimism about the pickup in demand for the semiconductor company's top-of-the-line Pentium chip. He forecasts that the Santa Clara, California, company will earn $8 a share in 1995, up from $5.24 in 1994.
Texas Instruments gained after the stock was raised to "buy" at PaineWebber Inc. by analyst John Lazlo. The S&P; semiconductor index of six stocks rose 4.58, to 230.13 -- an all-time high.
Yesterday's most active stocks in U.S. composite trading were Novell Inc., Intel, Amgen, EMC Corp. and Compaq Computer.