NEW YORK -- U.S. stocks rose to records yesterday on optimism that a strong economy and falling interest rates will allow corporate profits to increase more than expected.
Philip Morris Cos. led the gains, rising $6 to an all-time high of $131.50 on expectations that cigarette makers will negotiate a settlement of multibillion-dollar lawsuits.
The Dow Jones industrial average gained 78.50 to a record 7,067.46, surging in the last hour of trading after being little changed for much of the day. The Standard & Poor's 500 index rose 7.81 to a record 816.29, helped by gains in Merck & Co., Coca-Cola Co., General Electric Co. and bank shares like First Union Corp.
U.S. corporate profits surged 13 percent in the fourth quarter, their strongest showing of the year, in an expanding economy that spurred sales of cars, computer chips and consumer goods. The engine for earnings was the economy's faster-than-expected 4.7 percent growth in the quarter.
The Nasdaq composite index fell 1.40 to 1,365.79, held back by semiconductor and software stocks that led the market to records last year.
The Russell 2,000 index rose 0.92 to 370.05; the Wilshire 5,000 index rose 54.72 to 7,792.57, a record; the American Stock Exchange composite index climbed 3.95 to 598.10, also a record; and the S&P; mid-cap index slipped 0.14 to 268.91.
About 474 million shares changed hands on the New York Stock Exchange, with advancers outnumbering decliners 1,497 to 1,065. Stocks were helped by a string of acquisitions in the health care, media, hotel and financial industries.
Great Western Financial Corp., the nation's second-largest thrift, jumped $10.625 to $44.875 after H. F. Ahmanson & Co., the largest thrift, offered to buy the company for $6 billion. Ahmanson rose $4.375 to $44.875.
Other thrifts and financial shares gained. Glendale Federal Bank FSB rose $1.875 to $27.50; Golden West Financial Corp. rose $2.25 to $74.25; and J. P. Morgan & Co. rose $2.75 to $109.50.
Tobacco shares rose after people involved in the negotiations said tobacco company representatives have held talks with anti-tobacco lawyers and state officials to settle all health-related lawsuits for up to $250 billion. A settlement could cost cigarette makers as much as $10 billion a year, the people said.
RJR Nabisco Holdings Corp. rose $1.875 to $37.375 and UST Inc. rose $1 to $31.75.
HealthSouth Corp., the nation's largest U.S. operator of outpatient and rehabilitation clinics, fell $2.125 to $41 after it agreed to buy Horizon/CMS Healthcare Corp. for about $1.65 billion in stock and debt. Horizon/CMS rose $2.25 to $16.50.
Chancellor Broadcasting Co. rose 6.25 cents to $28 after Evergreen Media Corp. said it will buy the company for about $685 million in stock and debt. The combined company said it will buy Viacom Inc.'s radio stations for $1.075 billion. Viacom rose $1.625 to $35.
Renaissance Hotel Group NV rose $4.625 to $29.75 after Marriott International said it agreed to buy the company for $1 billion in cash and assumed debt, topping a Doubletree Corp. bid for the upscale lodging chain.
Destec Energy Inc. rose $1 to $20.50 after AES Corp. and NGC Corp. said they will pay $1.27 billion, or $21.65 a share, for the independent power producer.
Computer shares did not participate in the broad market's rally. Digital Equipment Corp. fell 62.5 cents to $33.50 after the computer maker's fiscal 1997 earnings estimate was cut to 70 cents from 85 cents by Goldman Sachs & Co.
Microsoft Corp. lost 50 cents to $97.375 and International Business Machines Corp., which is down 5 percent this year on concern a strong U.S. dollar will cut into profit from overseas sales, was unchanged at $145.
WMX Technologies Inc. rose $1.75 to $34.625 after Chief Executive and President Phillip Rooney resigned, effective immediately.
Pub Date: 2/19/97