Stocks rise as the cost of money declines Dow is up 12.64, but tech shares temper advance

NEW YORK — NEW YORK -- U.S. stocks rose yesterday as falling bond yields fueled expectations that profits at banks and savings and loans will surpass expectations. A slump in semiconductor, computer and software shares tempered the advance.

A report showing weaker-than-expected U.S. manufacturing activity suggested that economic growth has slowed enough for the Federal Reserve to lower interest rates this year. That would stimulate consumer borrowing in 1996.


The Dow Jones industrial average rose 12.64, to 5,087.13, led by gains in DuPont Co., General Electric Co. and J. P. Morgan & Co. An early afternoon wave of computer-guided selling tempered the advance.

Yesterday's gains extended the surge that carried the Dow industrials up 319 points, or 6.7 percent, in November -- the biggest monthly gain this year.


The Nasdaq composite index lagged the advance as Microsoft Corp., Cisco Systems Inc. and 3Com Corp. fell. The index dropped 3.92, or 0.4 percent, to 1,055.30.

The Standard & Poor's 500 index climbed 1.61 to 606.98, just below its high of 607.64 Wednesday. Saving and loans, steel and home-building companies gained.

Some 1,434 shares rose and 944 fell on the New York Stock Exchange.

Among broad market indexes, the Russell 2,000 index of small capitalization stocks rose 1.16 to 309.74; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, rose 10.60, to 5980.60; the Amex market value index slipped 0.73, to 536.64; and the S&P; 400 midcap index fell 1.06 from a record to 217.63.

Financial shares continued to rise on expectations that their profits will benefit the most from a rate cut. Falling interest rates lower the cost of raising the money needed to make loans and buy securities.

Among those that gained, Banc One Corp. gained 62.5 cents, to $38.875; Wells Fargo & Co. shares jumped $2.75, to $213; and First Fidelity Bancorp climbed $1.625, to $75.

The S&P; index of 23 regional banks rose 2.42, or 1 percent, to 243.43. The index is up 18.4 percent in the past three months, compared with the broader S&P; 500's 7.7 percent gain.

Expectations for another rate cut spread after the National Association of Purchasing Management said its index fell to 46.5 in November from 46.8 in October, the sixth time in seven months that manufacturing has contracted. Economists had expected a reading of 47.6.


The yield on the 30-year benchmark bond fell four basis points to 6.08, its lowest since Nov. 2, 1993.

Evidence of a slowing economy -- and falling interest rates -- were no help to semiconductor, software and computer companies. Concern spread that a sluggish economy would curb sales of personal computer and software during the important holiday season, and a string of disappointing retail sales reports diminished optimism that Christmas sales would revive retailers and with them, the economy.

International Business Machines Corp. dropped $1.875, to $94.75; Micron Technology Inc. slid $2.25, to $52; Texas Instruments Inc. fell $2.625, to $55.25; Compaq Computer Corp. dropped $1.50, to $47.875; and Hewlett-Packard Co. weakened $1.25, to $81.75.

Among stocks that gained, United Technologies jumped $1.375, a record $95.125, DuPont Co. gained $1.125, to $67.625; and Goodyear Tire & Rubber Co. added 50 cents to reach $42.875.

Steel stocks rebounded yesterday after analysts had downgraded their recommendations on concern that slumping steel prices will reduce profits. Many steel companies boosted spot market prices for sheet steel by about $30 a ton in January, but prices deteriorated during the year as demand softened. Analysts don't expect steelmakers to boost prices this January.