NEW YORK -- U.S. stocks posted their biggest rally this month yesterday after First Union Corp.'s $5.4 billion bid for First Fidelity Bancorp. sent bank shares soaring. A surge in semiconductor issues also helped to spur the advance.
The biggest U.S. bank buyout in history supported the idea that companies are fairly valued, even though major stock indexes and averages are up 18 percent this year. The offer came a week after International Business Machines Corp. acquired Lotus Development Corp. for $3.52 billion and First Data Corp. agreed to buy First Financial Management Corp. for $6.63 billion.
Share prices rose to record highs for a fourth straight day. The Dow Jones industrial average surged 42.89, to a record 4,553.68, its biggest jump since an 86.46-point gain on May 31. It was the 30-stock average's 39th record this year. Among yesterday's gainers, shares of Caterpillar Inc. rose $2.375, to $65; Aluminum Co. of America added $1.50, to $46.25; and DuPont Co. climbed $1.75, to $68.375.
Among broader indexes, gains in bank shares sent the Standard & Poor's 500 index up 5.39, to a record 545.22. First Fidelity rallied $10.25, to $59; First Interstate Bancorp climbed $1.50, to $82.375; Corestates Financial Corp. jumped $1.125, to $33.75; Mellon Bank Corp. added $1.50, to $43.375; and Barnett Banks Inc. rose $1.375, to $49.875. Shares of First Union, meanwhile, dropped $1.75, to $45.875.
The technology-laden Nasdaq composite index rallied 13.44, to 922.09, its biggest one-day leap since a 23.54-point jump on April 5 last year. It was the index's 12th gain in the past 14 days. Intel Corp., Microsoft Corp., Oracle Corp. and DSC Communications Corp. paced the advance.
About four stocks rose for every three that fell on the New York Stock Exchange, where more than 323 million shares traded hands. That's down from 445.2 million on Friday -- the sixth-most-active day in history -- and the three-month daily average of 338.3 million.
Semiconductor stocks surged after Micron Technology Inc. told investors that it sees room for gross profit margin in its chip group to improve during the next few fiscal quarter from the current 57 percent. Late last week, the company said profit in the three months that ended June 1 more than doubled on strong demand for memory chips and rising prices.
Intel rose 3.69, to a record $61.75 (adjusted for its 2-for-1 split); Texas Instruments skyrocketed $6.375, to a record $138.875; Micron catapulted $3, to $53; Applied Materials Inc. surged $2, to $83; and Motorola Inc. jumped $3.875, to $64.50.
Microsoft rallied for a second day after the software company triumphed Friday in a five-year battle over federal antitrust charges. A Washington appeals court ordered a federal trial court to approve the company's negotiated settlement with the Justice Department. The stock rose $2.81, to a record $89.81, and is up 5.8 percent the last two sessions.
The Russell 2,000 index of small capitalization stocks rose 1.42, to a record 282.23; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, rose 45.81, to an all-time high of 5,338.58; the Amex market value index rose 0.81, to a record 496.21; and the S&P; 400 midcap index rose 1.8, to a record 197.57.