NEW YORK -- U.S. stocks rallied to record highs yesterday, the anniversary of the 1987 stock-market crash, as investors drove up telephone, food and drug issues.
Companies that post consistent, dependable earnings growth even as the economy slows showed the biggest gains. Food stocks made their biggest one-day gain in almost five months.
Investors see "less volatility and a little bit more assurance that next year is going to be OK" in more predictable, less volatile food and drug stocks, said Ron Miterko, money manager in charge of $100 million in stocks at People's Bank in Bridgeport, Conn.
Earnings growth next year may slow to 6 percent or 7 percent instead of the 10 percent that many analysts expect, "and maybe a lot of growth will come from the consumer names," Mr. Miterko said.
In response to that belief, the Dow Jones industrial average surged 24.93, to 4,802.45, eclipsing a record set on Sept. 14. International Business Machines Corp., Coca-Cola Co. and McDonald's Corp. drove the advance, followed by Procter & Gamble Co. and General Electric Co.
The Standard & Poor's 500 index climbed 3.21, to a record 590.65. Gains in telephone, soft-drink, food, drug and computer software stocks led the third straight advance.
To be sure, almost six stocks fell for every five that rose on the New York Stock Exchange, where volume dipped to 406.6 million shares from 411.3 million yesterday.
On the Nasdaq stock market, the composite index rose 1.84, to (( 1,046.97, rebounding from an early drop of 5.73 but still beneath a record 1,067.4 set on Sept. 13.
Prices got an early afternoon lift when McDonald's said third-quarter earnings rose to 56 cents a share from 48 cents in the year-earlier period, beating estimates of 55 cents. The Oak Brook, Ill.-based restaurant chain gained $1.50, to $40.50.
Razor-blade maker Gillette, ahead $1.125, to $49.75, also boosted sentiment toward reliable "consumer growth" stocks by posting quarterly profits of 46 cents a share, up from 39 cents a share last year.
Also aiding the turnaround in stocks was a $1.6 billion takeover offer for medical-equipment maker Sentiment Corp. by Johnson & Johnson. Sentiment, valued at $100 a share by the bid, vaulted $21.625, to $107.625. J&J; rose 87.5 cents to $79.
"The earnings slowdown is the catalyst" for the rally in traditional consumer growth stocks, said Tom McManus, an equity strategist at Morgan Stanley & Co. who developed the consumer and cyclical indexes.
Telephone stocks, whose earnings fluctuate little, surged as Bell Atlantic posted third-quarter earnings of $1.01 a share, 10 cents better than last year and two cents above analysts' estimates.
Bell Atlantic jumped $1.50, to $63.50, Ameritech Corp. surged $2, to $54, SBC Communications Inc., formerly Southwestern Bell, rose $1.75, to $55.875, Sprint Corp. advanced $1.125, to $37.50, and Alltel Corp. spurted $1.625, to $29.875.
Food processors posted their biggest advance since May 31. Hershey Foods Corp. spurted $2.125, to $66.75, H. J. Heinz Co. leaped $1.875, to $47.375, General Mills Inc. climbed $1.875, to $58.125, Quaker Oats Co. grew $1.625, to $34.50, Unilever NV gained $1.75, to $130.625, Ralston-Purina Group added $1.125, to $59.50, Sara Lee Corp. rose $1, to $30, and Campbell Soup Co. increased $1.50, to $52.50.
Makers of household products like soap and detergents also made gains. Procter & Gamble, which reports earnings next Wednesday, gained $1.375, to $81.25. Colgate climbed $2.50, to $70.375, after it said third-quarter per share earnings from operations fell to 78 cents from $1.00, one cent more than expectations.
The Dow Jones utility index gained 1.58, to 217.24, its biggest gain in more than a week.
The Wilshire 5000 index spurted 19.37, to 5839.66, shy of Sept. 20 peak, and the Russell 2000 index of small-company shares eased 0.63 to 303.42.