NEW YORK — NEW YORK -- U.S. stocks surged yesterday as investors drove up shares of companies that are taking measures to boost their share prices.
The Dow Jones industrial average set its 17th record of the year, rising 42.27 points to 5,642.42, surpassing the 5,630.49 set Feb. 23. In three days, the 30-stock average is up 156.8 points, or 2.9 percent. Shares of International Business Machines Corp. and Philip Morris Cos. paced the advance.
Tobacco issues gained after RJR Nabisco Holdings Corp. raised its dividend 23 percent and said it will buy back up to 10 million shares. W. R. Grace & Co.'s stock rallied after it rejected a takeover offer and vowed to continue steps that will drive its stock price higher.
The moves come amid a flurry of business spinoffs and stock repurchases by U.S. companies during the last year to sidestep any slowdown in the economy.
In the broad market, the Standard & Poor's 500 index, representing about 75 percent of the value of all U.S. stocks, rose 4.98, to 655.79. The index, which set a record of 661.45 Feb. 12, is up 6.47 percent this year.
Helping that index gain yesterday was Grace, which shot up $9, to $77.625. The chemical company could fetch as much as $90 a share in a takeover, money managers said, after it rejected a proposal to merge with Hercules Inc. Shares of Jefferies Group Inc., a Los Angeles-based investment bank, surged $5, to $66, after saying it would repurchase 8 percent of its outstanding shares. And BankAmerica Corp.'s stock climbed $2, to $77.50, after it said it will buy back $2 billion of its common stock by the end of 1997.
Among broad market indexes, the Russell 2,000 index of small capitalization stocks rose 1.29, to 326.85; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, rose 44.14, to 6,420.9; the American Stock Exchange market value index climbed 2.11, to 569.15; and the S&P; 400 Midcap index rose 1.14, to 229.65.
On the New York Stock Exchange, 1,123 stocks fell and 1,220 issues rose. About 445.7 million shares changed hands on the Big Board, swamping the three-month daily average of 413.3 million shares.
Among tobacco shares, Philip Morris jumped $2.50 to a record $104 and RJR, the maker of Camel cigarettes, climbed 25 cents, to $34.875, a 52-week high. The S&P; tobacco index of three companies gained 37.87, to 1,794.30, the highest since its inauguration in January 1988.
Philip Morris was added to Goldman, Sachs & Co.'s "priority" list of top stock picks because the firm thinks the tobacco company's earnings will grow 19 percent this year, helped in part by the steady demand for its Miller beer, Marlboro cigarettes and Kraft cheeses.
RJR's dividend yield -- annual dividend divided by stock price -- is now 5.3 percent, more than double the S&P; 500's.
After a three-day tumble, fueled by Compaq Computer Corp.'s announcement that it slashed prices on some models in the wake of slumping demand, technology shares rose.
The Morgan Stanley High Tech index gained 6.96, or 2.2 percent, 318.08 -- recovering part of a 9 percent drop.
IBM's shares rose $2.875, to $119, a day after Chairman Louis V. Gerstner Jr.'s optimistic remarks to analysts.
The Nasdaq composite index, flush with computer and software stocks, rose 11.93, to 1,096.81 after falling for three straight days. Leading the advance, shares of Cisco Systems Inc. rose $2.875, to $47; Oracle Corp. rose $3.375, to $51.75; and Microsoft Corp. rose $1.875, to $98.125.
Yesterday's most active stocks in composite trading were Micron Technology Inc., Hanson PLC's American depositary receipts, Cisco Systems Inc., Bay Networks Inc. and Compaq Computer.
Stocks also overcame a drop in bond prices. The yield on the benchmark 30-year Treasury bond rose to 6.38 percent from 6.33 percent.
Pub Date: 3/06/96