Stocks hit new high on optimistic tide

NEW YORK — NEW YORK -- U.S. stocks rose to record highs yesterday for a second day as technology shares gained and optimism grew that the economy won't slow enough to squelch profit growth.

The economy will rebound later this year, even though consumers are spending less now, because lower borrowing costs for mortgages and auto loans will get people to start buying again, said Jack Shaughnessy, director of research at Advest Inc.


"The fact that we'll see an acceleration means profits will remain fairly robust," Mr. Shaughnessy said.

The Dow Jones industrial average closed up 5.19, at a record 4,496.27, after rising as high as 4,510.45 -- the first time the 30-stock average broke 4,500. It took about 3 1/2 months for the average to gain 500 points from the 4,000 mark, compared with 21 months to move from 3,500 to 4,000.


Among the Dow industrials, gains in Philip Morris Cos., DuPont Co. and Texaco Inc. offset losses in International Paper Co., AlliedSignal Inc. and Caterpillar Inc. Shares of Merck gained 25 -- cents, to $48.375, after rising as high as $49 amid optimism that the company's osteoporosis drug, Fosamax, will receive a positive recommendation from a Food and Drug Administration advisory committee next month and be ready for sale by late 1995.

Broader market indexes also reached records. The Standard & Poor's 500 index rose 0.65, to an all-time high of 537.12, its second straight record. The technology-laden Nasdaq composite index rose 6.96, to a record 902.68, its first move above 900 and the index's 10th gain in the last 12 days. Shares of Intel Corp., Microsoft Corp., Tele-Communications Inc., Comcast Corp. and Applied Materials Inc. rose the most.

Computer, semiconductor and software company shares rose as investors searched out companies that are exhibiting the greatest profit growth.

The drive by businesses and consumers to boost their productivity won't stop no matter how the economy fares, technology-stock backers said.

"High-tech shares are still growth stocks," Mr. Shaughnessy said. "Investors want to own strong-growing companies because they are the best antidote in a declining economy."

That said, the stocks are also benefiting from an aura of invincibility, the research director said. "Imagination drives these stocks. People don't see the problems, just the upside potential."

About six stocks rose for every five that fell on the New York Stock Exchange, where more than 335 million shares traded hands. The three-month daily average is 337.34 million.

Among the biggest decliners on the day were paper stocks, which fell on concern that an economic slowdown will cut demand for goods of all sorts and the boxes used to ship them. Wausau Paper Mills Co. said Wednesday that profit in the third quarter ended May 31 fell to 30 cents a share from 42 cents a year ago.


"Clearly, the decline in box shipments reflects the lack of GDP growth we are apparently experiencing in the second quarter," said Richard Schneider, an analyst at PaineWebber Inc., in a report to clients yesterday.

Shares of International Paper dropped $1.125, to $79.375; Weyerhaeuser Co. slid $1.11, to to $44.64; Georgia-Pacific Corp. gave up $1.875, to $79.125; and Kimberly-Clark Corp. slid $1.25, to $58.875.

The Russell 2,000 index of small capitalization stocks rose 1.44, to a record 280.29; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, rose 12.65, to an all-time high of 5,268.69; the Amex market value index fell 2.47, to 494.72; and the S&P; 400 midcap index rose 0.80, to a record 194.86.

Yesterday's most active stocks in U.S. composite trading were Vodafone Group PLC, Computer Concepts Corp., Tele- Communications, Intel and LTX Corp.