NEW YORK -- U.S stocks rose yesterday, driving the Standard & Poor's 500 index to a record high amid gains in financial, beverage and semiconductor issues.
Stocks advanced amid optimism that the Federal Reserve won't raise interest rates again this year. A government report showing that retail sales are rising modestly furthered a growing belief that higher interest rates have already subdued inflation.
"There's no reason to raise rates again," said Elizabeth Bramwell, president of Bramwell Capital Management, which manages $100 million. A slowdown in auto sales, mortgage applications and consumer spending means the Fed "risks recession if it does." A slumping economy would dim prospects for future corporate profit gains.
The Dow Jones industrial average rose 4.04, to 3,958.25, after seesawing in a 16.15-point range. It was the average's highest close since it reached 3,967.66 on Feb. 3 last year. Gains in American Express Corp., International Business Machines Corp. and Philip Morris Cos. paced the advance.
Among broad market indexes, the S&P; 500 rose 0.90, to 482.55, eclipsing its previous high of 482, set Feb. 2 last year. The Nasdaq composite index rose 1.20, to 790.62, the 10th gain in 11 sessions and its highest since March 23. Shares of Intel Corp., MCI Communications Corp. and Nextel Communications Inc. rose the most.
About 11 stocks fell for every 10 that rose on the New York Stock Exchange, where about 301.2 million shares traded hands. It was the first time declining stocks outpaced advancers since Jan. 30.
Trading was light as investors waited for today's release of the Consumer Price Index. The index is one of the most important inflation indicators; it will provide further evidence of whether the Fed's rate increases have slowed the economy or whether inflationary growth will require another move by the Fed.
Among the biggest gainers yesterday were stocks sensitive to swings in interest rates -- securities firms and banks. Banks and other such businesses should do well if the Fed is through raising interest rates, said Richard Ciardullo, head trader at Liberty Investment Management. Lower rates encourage people to borrow money and also widen banks' profit margins.
Shares of Merrill Lynch & Co. rose $1.25, to $40; Charles Schwab Corp. gained 75 cents, to $43.375; First Interstate Bank Corp. jumped 87.5 cents, to $80.375; KeyCorp strengthened 50 cents, to $28.25; NationsBank Corp. added 50 cents, to $49.625; and Bankers Trust New York Corp. rose $1.125, to $63.375.
American Express Co. surged $1.375, to $33.50. Investor Warren Buffett and his affiliates have acquired a 9.8 percent stake in the New York-based travel and financial services company, it was disclosed yesterday. Mr. Buffett plans to seek regulatory approval to increase his stake to more than 10 percent, the company said.
PNC Bank Corp. shares gained for the same reason: Mr. Buffett also disclosed that he and his affiliates had taken an 8.3 percent stake in the Pittsburgh-based banking company. The stock spurted 87.5 cents, to $25.
Health-care stocks fell, meanwhile, after United HealthCare Corp. said fourth-quarter net income gained 41 percent, less than some analysts expected. The Minnetonka, Minnesota-based health maintenance organization's stock dropped $2.50, to $45.25.
Yesterday's optimism about interest rates was touched off by a government report showing U.S. retail sales rose just 0.2 percent in January. Sales for December gained a revised but still lackluster 0.2 percent.