NEW YORK -- U.S. stocks rose yesterday for a second day as analysts told investors to buy International Business Machines Corp., extending a rally in technology shares.
The advance was supported by renewed optimism that the Federal Reserve will lower interest rates again, after a report on manufacturing indicated that economic growth may be easing.
The Dow Jones industrial average climbed 5.99 points, to 4,610.56, led by gains in IBM, Union Carbide Corp. and AlliedSignal Inc.
IBM rebounded from Wednesday's slide as analysts at Salomon Brothers Inc. and Merrill Lynch & Co. told customers they still think the computer maker's shares are a good buy. The stock's already up 38.3 percent so far this year.
IBM's shares rose $1.75, to $103.375, compared with their six-month high of $113.625 set two weeks ago. On Wednesday, the stock dropped 75 cents, to $101.625 as shares of many other technology companies climbed. Salomon Brothers analyst John Jones, in a report to his customers, said the shares could reach $140 in the next 12 months.
Aluminum Co. of America missed the rally, as its shares fell $1.875, to $57.125. Peter Marcus, an analyst at PaineWebber Group Inc., told customers to sell shares of the company because its stock "looks overpriced on a valuation basis" compared with other leading nonferrous metal stocks. Without the loss by Alcoa, the Dow would have been almost six points higher.
The broader Standard & Poor's 500 index climbed 0.96, to 561.88, as semiconductor, computer and auto shares climbed. Retail, aluminum and major regional banks, meanwhile, were the biggest decliners.
Intel Corp.'s $1 gain to $61.375 and Amgen Inc.'s $1.25 jump to $47.875 pushed the Nasdaq composite index up 7.50 points, to 1,020.11.
The Russell 2000 index of small companies rose 2.05, to 305.31, and the Wilshire 5000 index was up 17.45 points, to 5,602.28.
The American Stock Exchange market value index set its second straight record high, eking out a 0.45 rise to 534.46.
Some 1,305 shares rose and 867 fell on the New York Stock Exchange. Trading was light as the Labor Day weekend approached. About 301 million shares traded yesterday.
Technology stocks were the market leaders yesterday as signs that the economy is sputtering sent investors looking for shares of companies whose earnings will grow the fastest, analysts said.
Evidence that sales of Microsoft Corp.'s flagship software program, Windows 95, have taken off since its introduction last week boosted confidence in the outlook for profits at technology companies.
The success of Windows 95 alleviated concern that sales at other technology companies would slow down in the summer and cripple future earnings growth. The Philadelphia semiconductor index, which has more than doubled this year, slipped 9.8 percent after Aug. 16 amid concern that profits wouldn't live up to analysts' expectations. Yesterday, the index gained 5.19 points, or 2 percent, to 275.63.
Among tech shares that gained, Compaq Computer's stock added 50 cents to reach $47.75. Micron Technology Inc.'s shares jumped $3.50, to $76.75. Motorola Inc.'s stock climbed $1.875, to $74.625, and Applied Materials Inc. added $1, to reach $104. Microsoft retreated from its early gains, though, falling 75 cents, to $92.50.
Retailers' earnings, on the other hand, have been among the hardest hit by rising rates and a slowing economy this year. Yesterday, the group fell, after reporting lower-than-expected sales for August as hot weather and a lack of shopper interest hurt back-to-school sales. Wal-Mart Stores Inc. posted its smallest increase since March, sending its stock down 37.5 cents, to $24.625. Kmart Corp.'s stock slipped 37.5 cents, to $13.625.
The prospect of a slowing economy that will curtail inflation helped benchmark 30-year Treasury bonds to turn higher. Stock prices jumped as bond yields plunged to 6.65 percent, after rising 6.72 percent earlier in the day.
Gains in auto stocks also helped to carry the advance. The big three U.S. carmakers, Chrysler Corp., General Motors Co. and Ford Motor Co., are expected to report sales this week that are a significant improvement over July's 13.7 million annualized selling rate, the lowest of the year. Chrysler shares jumped $1.50, to $53.75; Ford Motor Co.'s stock was up 25 cents, to $30.625; and General Motors added 37.5 cents to reach $47.
In addition, investors bid up shares of companies announcing stock splits yesterday. Heavy machinery maker Deere & Co. said it would offer a three-for-one split of its stock. The company's shares rallied $1.25, to $85.625, adding to their $1.125 gain Wednesday.
Cypress Semiconductor Corp.'s stock advanced $1.125, to $45.50, after it said it will give investors two shares for every one they now hold.
Many shares jumped after analysts changed or reiterated their opinion on stocks. Shares of Adobe Systems Inc., for example, rose $1.375, to $51, when an Alex. Brown & Sons Inc. reiterated a "strong buy" on the stock. For the past three days, the software company's shares had plunged 15.7 percent on concern that its fiscal third-quarter earnings won't meet expectations.