NEW YORK -- U.S. stocks gained yesterday, led by technology and auto issues, amid signs demand for computers and cars remains strong.
Drug and consumer-product companies were among the biggest decliners, meanwhile, after a government report suggested that the Federal Reserve may not raise interest rates again soon. These so-called defensive stocks generally do better when rates rise and economic growth slows.
"Interest rates are calling the tune of the stock market," said Peter Canoni, managing director of equity investments at Aeltus Investment Management Inc. Conviction is growing in the market that "the Fed will sit back and watch what they have already done."
The Dow Jones industrial average rose 6.39, to 3,939.07, the fifth straight day the average closed no more than 10 points higher or lower than the previous day's close. General Motors Corp., McDonald's Corp. and Philip Morris Cos. were the biggest gainers.
Shares of General Motors rose 75 cents, to $39.875, its highest close since $40.25 on Jan. 19. The nation's No. 1 automaker said it still expects to sell between 15.5 million and 16 million vehicles in 1995. While 1996 sales probably won't match this year's sales, the company said, it doesn't foresee a sharp drop.
Among broad market indexes, the S&P; 500 index rose 1.27, to 481.46, just shy of its all-time closing high of 482 on Feb. 2 last year. The S&P; auto index, down 33 percent during the last year, rose 4.36, or 2.2 percent, to 196.91. Besides General Motors, Chrysler Corp. gained $1.25, to $46.625, and Ford Motor Co. climbed 62.5 cents, to $25.875.
The Nasdaq composite index, laden with technology stocks, jumped 4.99, to 790.43 -- its ninth straight gain and its highest since 797.53 on March 23. Shares of Tele-Communications Inc., Novell Inc., Amgen Inc. and Oracle Systems Corp. rose the most.
The Morgan Stanley consumer index of 30 stocks, down for most of the day, managed a gain of 0.29, to 221.18. Losses in Crown Cork & Seal Co., Banc One Corp., Gillette Co. and Colgate-Palmolive Co. held the index in check. The index rose 5.6 percent during the last three weeks as investors speculated consumer-goods companies would continue to post strong earnings even if the economy slowed.
"There was a panic into the stocks, and maybe cooler heads have prevailed," said Elizabeth Mackay, managing director of research at Bear, Stearns & Co.
Colgate-Palmolive fell 62.5 cents, to $62.375; Gillette fell $1, to $77.375; and Crown Cork lost 75 cents, to $40.75.
Semiconductor stocks rose after a report showing strong demand for chips in January. The Semiconductor Industry Association's book-to-bill ratio showed chip makers took in $113 in new orders for every $100 in chips they shipped in North America. That's up from $107 in new orders in December.
Shares of Atmel Corp. jumped $1.125, to $35; Applied Materials Inc. rose 87.5 cents, to $44.50; LSI Logic Corp. surged $2.125, to $52.125; Micron Technology Inc. soared $2.25, to $52.625; and Cypress Semiconductor Corp. rose 50 cents, to $26.25.
Advancing stocks outnumbered decliners by 4-to-3 on the New York Stock Exchange, where about 297.5 million shares traded hands -- less than the three-month daily average of 314 million.
Airline issues rallied a day after Delta Air Lines Inc. said it will cap travel agent commission payments at $50 for all domestic flights.
The commission on a Dallas-New York round-trip ticket would drop to $50 from $117, Merrill Lynch & Co. analyst Candace Browning said.
The Dow Jones transportation average rose 38.89, to 1,542.13. Shares of Delta surged $4, to $56.75; UAL Corp., the parent of United Airlines, soared $5.25, to $97; and AMR Corp., the holding company for American Airlines, spurted $3 to $60.25.
"We are cautiously optimistic that Delta's move will be matched," Ms. Browning told clients yesterday. She said the cut in commissions is "absolutely necessary for returning the industry to profitability."
Gains in stocks were tempered by a slump in the bond market, analysts said.
U.S. Treasury bonds fell and yields rose even though the government's first inflation reading for 1995 showed prices paid to factories, farmers and other producers rose 0.3 percent in January, less than expected. Bond firms struggled to unload some of the $40 billion of notes and bonds they purchased in the government's quarterly debt auction this week.
The benchmark 30-year bond fell about 50 cents, or $5 per $1,000, boosting its yield five basis points, to 7.67 percent.
It was the biggest drop in prices since Feb. 1, when the Federal Reserve raised interest rates for the seventh time in about a year.