NEW YORK -- U.S. stocks surged to record highs yesterday amid increased confidence that corporate earnings will keep expanding as long as economic growth stays moderate and inflation low.
Telephone, health care, computer software, food and household products companies paced the advance, which began after the Commerce Department issued a weaker-than-expected report on retail sales. The report bolstered investors' conviction that the economy will slow just enough to keep inflation and interest rates under control without hurting companies' profits.
"The stock market is trading up because of the outlook for steady growth with the potential for lower interest rates," said Joseph DeMarco, head of equity trading at $4 billion HSBC Asset Management, a unit of Hongkong & Shanghai Bank. "Lower interest rates and continued growth are good for everybody."
The Dow Jones industrial average jumped 23.52, to 4,048.75, a new closing high, after rising to 4,060.51, fueled by gains in Boeing Co., Minnesota Mining & Manufacturing Co. and AT&T; Corp. The average's former closing high of 4,035.61 was set on Friday.
About two stocks gained for every one that fell on the New York Stock Exchange. Trading on the exchange totaled 346.2 million shares, equal to this year's average of 346.2 million.
The broader market also reached record highs. The Standard & Poor's 500 index rose 2.84, to 492.89, its third straight record, while the Nasdaq composite index advanced 5.93, to 808.24, eclipsing its March 18, 1994, record of 803.93. Microsoft Corp., Intel Corp., DSC Communications Corp., Tele-Communications Inc. and Bay Networks Inc. paced the Nasdaq advance.
The Wilshire 5000 index of stocks on the New York and American Stock Exchanges and the Nasdaq stock market also reached its third consecutive record, rising 25.31, to 4,845.01.
The Russell 2000 index of small stocks added 1.08, to 257.26, still below a March 1994 record of 271.08. The American Stock Exchange's market value index rose 0.85, to 453.91, beneath a February 1994 peak of 487.89.
The Commerce Department's report that retail sales dropped 0.5 percent in February drove Treasury bond yields to a nine-month low, making stocks more attractive compared with bonds and easing companies' and consumers' borrowing costs.
Yields on the Treasury's benchmark 30-year bond dropped as low as 7.34 percent, the lowest since June, from 7.45 percent Monday, and ended at 7.36 percent.
Technology stocks surged, with a half-dozen leading manufacturers posting 52-week highs as investors anticipated continued large increases in earnings.
Micron Technology Inc. gained 50 cents, to $69.50; Texas Instruments Inc. rallied $1.75, to $91.125; Microsoft Corp. rose $2.75, to $71.75; Intel Corp. increased $1, to $82.375; and LSI Logic Corp. rose $1.25, to $56.125.
"Technology has been very strong," because so many of the companies are exhibiting "high earnings momentum," said David Diamond, money manager at Boston Co. Asset Management in charge of small-capitalization stocks.
Professional investors said the outlook for earnings is promising. "Maybe it's just nirvana, and maybe this time will be different: We can have slow growth and just keep going," said John Church, chief investment officer at $7.5 billion Glenmede Trust Co. in Philadelphia.
Dart Group soared $14.75, to $89.75. The Landover auto parts, book and grocery store chain is considering a $130 million stock buyback or special dividend aimed at boosting its share price and fending off a bid for control by Dart's president, Ronald Haft.