Dow 30 climbs to record 5,904.91 Optimism grows about inflation and interest rates

NEW YORK — NEW YORK -- U.S. stocks rose to records yesterday, led by bank and financial shares, as optimism spread that interest rates won't rise and clamp down on profits. The Dow Jones industrial average closed above 5,900 for the first time.

Boosting the outlook for stable interest rates was a report that U.S. manufacturing activity slowed in September. With more evidence that inflation remains dormant, bond yields fell to their lowest since Aug. 22. That drop was good news for companies whose business revolves around borrowing and lending money.


The Dow Jones industrial average rose 22.73 to a record 5,904.90, surpassing its previous high of 5,894.73 Sept. 23. The 30-stock average overcame an early 20-point decline to set a record on the first day of the fourth quarter. Shares of Texaco Inc. and Philip Morris Cos. paced the advance.

Among broad market indexes, the Standard & Poor's 500 index climbed 1.75 to 689.08, its second record in a row. The Nasdaq composite index, home to a slew of computer, semiconductor and software shares, wasn't as fortunate, falling 5.41 to 1,221.51. It is now about 28 points from its record set in June.


The Russell 2,000 index of small capitalization stocks fell 1.06 to 345.33; the Wilshire 5,000 index rose 7.54 to 6,773.18, its second straight record; the American Stock Exchange market value index slid 2.94 to 568.55; and the S&P; 400 mid-cap index fell 0.45 to 241.48.

Advancing stocks topped decliners 1,318 to 1,106 on the New York Stock Exchange, where about 421.6 million shares changed hands.

Financial stocks gained as the yield on the benchmark 30-year Treasury bond fell to 6.90 percent from 6.92 percent Monday. The Dow Jones utilities index, which is considered a good gauge of interest rate expectations, jumped 1.47 to 218.35.

Citicorp rose 87.5 cents to $91.50; Chase Manhattan Corp. jumped $1 to $81.125; MBNA Corp. rose 50 cents to $35.25; Federal Home Loan Mortgage Corp. climbed $1.625 to $99.25; and Alex. Brown Inc. rose 87.5 cents to $58.75.

Among utilities, Peco Energy Co. climbed 37.5 cents to $24.125, and Pacific Gas & Electric Co. rose 25 cents to $22.

Coca-Cola's stock fell 75 cents to $50.125 after the company said third-quarter earnings would only match estimates. Retail stocks were among the session's biggest losers. Dayton-Hudson Corp. slid $1.625 to $31.375; Wal-Mart Stores Inc. dropped 37.5 cents to $26; May Department Stores Co. fell 87.5 cents to $47.75; Sears, Roebuck & Co. dropped 37.5 cents to $44.375; and J. C. Penney Co. slipped 62.5 cents to $53.625.

Semiconductor and computer stocks slid on the prospect that earnings will fall short of expectations. Micron Technology Inc. fell $1.375 to $29.125; Texas Instruments Inc. fell $1.125 to $54; LSI Logic Corp. dropped 50 cents to $22.75; and Hewlett-Packard Co. fell 87.5 cents to $47.875.

Ivax Corp. fell $2.25 to $14 after announcing that it expects to report a third-quarter loss of at least $43 million as it closes plants and takes charges for excess inventory and bad debt.


HCIA Inc. tumbled $27.125 to $32.875 after the company said third-quarter net income will range from 10 cents to 15 cents a share before charges, less than half of analysts' estimates. Competitor Envoy Corp. slid $1.75 to $37.

Apple Computer Inc.'s stock rose $2.4375 to $24.625 after the company's chief financial officer said Apple could return to profitability by December.

America Online Inc.'s stock fell $3.50 to $32. The computer online services company said in a federal filing that growing competition in the industry could hurt its earnings and revenue.

Student Loan Marketing Association soared $3.875 to $78.50. The U.S. Senate cleared the federally chartered organization to become a private company.

Pub Date: 10/02/96