NEW YORK -- U.S. stocks closed out their best week since Christmas 1991 yesterday as lower Treasury bond yields opened the way for improved corporate profits next year.
Many investors said a weaker-than-expected employment report for July almost assures that the Federal Reserve won't need to raise interest rates this month -- or maybe any time this year -- to fight off inflation.
Financial and electric utility stocks that perform best when interest rates are falling, and computer chip makers and house builders whose business is tied to swings in the economy, led stocks' fourth straight advance.
The Dow Jones industrial average climbed 85.08, to 5,679.83, yesterday, bringing its gain for the week to 207 points. It is now ahead 9.6 percent since falling to a six-month, intraday low on July 16.
The 30-stock average is also only 98 points, or 1.7 percent, below a May 22 peak. Only one blue chip stock -- United Technologies Corp. -- fell yesterday.
The Standard & Poor's 500 index, representing 75 percent of the value of all U.S. stocks, rose 12.47, to 662.49. For the week, the S&P; climbed 4.2 percent, the most since Dec. 27, 1991, shortly after the Federal Reserve twice cut interest rates.
Advancing stocks outnumbered declining issues 2,105 to 539 on the New York Stock Exchange, the broadest advance since April 1994, as 442 million shares changed hands.
The Nasdaq composite index, boosted by Centocor Inc., Xilinx Inc. and Gartner Group Inc. soared 26.07, to 1124.92.
The jobs report sent yields on 30-year Treasury bonds to 6.73 percent, their lowest since early April, and below 7.01 percent a week ago. Lower rates eventually spur consumer spending, boost corporate profits by cutting companies' borrowing costs and make stocks a more attractive investment than bonds.
Financial stocks, which see rising demand for loans and mortgages as a result of lower interest rates, were among the day's best performers. Federal Home Loan Mortgage Corp. surged $4.875, to $92.875, and Federal National Mortgage Association rose $1.625, to $34.875.
Among money-center banks, Citicorp advanced $3.875, to $87.125, Chase Manhattan Corp. rose $2.875, to $74, and BankAmerica Corp. gained $2.75, to $84.25.
Utility stocks, whose large debt loads are less costly to finance and whose high dividends grow more attractive when rates decline, rallied. American Electric Power Co. gained 75 cents, to $42.875, and Pan-Energy Corp. rose 75 cents, to $33.
Semiconductor manufacturers, among the market's worst performers since September, benefited from expectations that earnings might be on the rebound. LSI Logic Corp. rose $3, to $22.125, and Micron Technology Inc. jumped $3.3125, to $22.5625. Intel Corp., the most active stock on U.S. markets as 13.4 million shares traded, jumped $1.75, to $78.75.
Micron and the Federal Aviation Administration agreed to build a passenger and luggage tracking system to improve airline safety.
Homebuilders benefited from expectations that falling mortgage rates will stimulate demand for new houses. Centex Corp. rose $2.375, to $31.75, Pulte Corp. jumped $1, to $26.625, and Kaufman & Broad Home Corp. rose 37.5 cents, to $12.625.
Airline stocks climbed after AMR Corp., parent of American Airlines, reported a surge in domestic passenger traffic in July.
AMR was up $3, to $81.75, Delta Air Lines Inc. rose $1.50, to $71.125, and UAL Corp., parent of United Airlines, gained $1.50, to $52.25.
Forecasts of a prolonged economic expansion -- and higher demand for freight transportation -- pushed up railroads. Burlington Northern Santa Fe gained $1.25, to $79.75, Conrail Inc. rose $1.375, to $67.625 and Norfolk Southern Corp. advanced 62.5 cents, to $82.
Pub Date: 8/03/96