NEW YORK — NEW YORK -- U.S. stocks staged a late rally yesterday as enthusiasm for corporate profits in an expanding economy overcame concern that a quicker-than-expected rate of growth could force interest rates higher.
Caterpillar Inc. and Sears, Roebuck & Co. boosted the Dow Jones industrial average out of a 17-point morning drop. The average closed up 8.51 at 5,656.90.
General Motors Corp. fell most in the Dow industrials after reporting that its U.S. auto sales dropped 7.9 percent in August from last year's level. Shares of the world's largest automaker slid 87.5 cents to $48.875.
In the broader market, the Standard & Poor's 500 index rose 0.89 to 655.61; the Nasdaq composite index gained 1.53 to 1,143.82; the Russell 2,000 index of small capitalization stocks advanced 1.18 to 334.56; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, jumped 10.11 to 6,454.80; the American Stock Exchange market value index lost .45 to 557.34; and the S&P; midcap index rose .92 to 232.13.
The 30-stock Morgan Stanley cyclical index, which counts Sears and Caterpillar as members, rose 1.82 to 365.43. Honeywell Inc. led the charge, rising $2 to $61.125 after Cowen & Co. reiterated its "strong buy" rating. It was an all-time high for the manufacturer of automation and control systems.
By contrast, the Morgan Stanley consumer growth index, whose individual shares such as Gillette Co. tend to perform better when growth is slowing, retreated 0.44 to 303.20.
Rubbermaid led the decline in the index after disclosing that higher costs and lower sales of playground equipment would produce earnings lower than analysts expected.
The maker of plastic and rubber products said it would pay $320 million for Graco Children's Products Inc., a closely held maker of strollers and children's toys. Rubbermaid's shares fell 3.625 to 22.875.
Digital Equipment Corp. rose 50 cents to $37.50 as investors were more heartened by company plans aimed at expanding profit margins than discouraged by a report that sales across Digital's personal computer and workstation lines are slower than expected this quarter.
Rival International Business Machines Corp. fell 62.5 cents to $114.625. Hewlett-Packard Co. closed down 37.5 cents to $44.25.
Advancing shares outnumbered those that declined by a margin of 1,379 to 947 on the New York Stock Exchange. About 351.3 million shares changed hands.
Shares of Office Depot Inc., the largest seller of business supplies, rose $4.50, or 28 percent, to $20.375 after No. 2 Staples Inc. said it would buy its bigger competitor for $3.5 billion in stock. Staples fell 75 cents to $18.75 on trading of 24 million shares, the most-actively traded U.S. issue.
OfficeMax Inc., the next-largest retailer of business goods, retreated 62.5 cents to $13.125 amid concern that its prices will be undercut by the merged competitors.
Sears jumped after a weekly retail report by Tokyo-Mitsubishi/Schroder Wertheim said sales in stores open more than a year rose 1.3 percent compared with the prior week. Its stock jumped $1.125 to $44.75. May Department Stores Co. showed a 10 percent gain and rose $1.375 to $47.50.
Caterpillar gained $1.625 to $71.
Matrix Pharmaceuticals Inc. sank 31 percent after Cowen & Co. cut its earnings estimates for coming years and its investment opinion on the cancer-treatment company. Its shares dropped $3.50 to $7.875.
3Com Corp. jumped $1.25 to $48.125 after Soundview Financial Group raised its earnings estimate for the builder of computer networks by 5 cents to $2.25 for fiscal year 1998, ending in May. Analyst Michael Karfoupoulos also boosted his short-term rating to "buy" from "hold."
The yield on the 30-year Treasury bond rose to 7.10 percent from 7.05 percent Tuesday.
Pub Date: 9/05/96