Stocks up in largest 3-day rise since '91 Bond rally, small increase in labor costs are noted; Dow closes at 7,008.99

THE BALTIMORE SUN

NEW YORK -- U.S. stocks rose yesterday, capping their biggest three-day advance since 1991. Intel Corp., Coca-Cola Co. and Microsoft Corp. led the gains.

Stocks got a boost from bonds, which rallied on signs that a federal budget agreement may be imminent. Investors also focused on figures out yesterday showing a surprisingly small rise in labor costs. The news lessened expectations that the Federal Reserve might raise interest rates.

"The perception is that the Fed won't raise rates in May and that interest rates will go down, and that will push up stocks," said Stanley Nabi, chairman of the investment policy committee at Wood Struthers & Winthrop.

The Dow Jones industrial average rose 46.96 to 7,008.99, within 77 points of its all-time closing high in March.

The Standard & Poor's 500 index rose 7.29 to 801.34. The index is up 4.7 percent since Friday, its best three-day gain since January 1991. The Nasdaq composite index rose 18.13 to 1,260.76.

Eight stocks rose for every five that fell in trading of 562.8 million shares.

The Russell 2,000 index of small capitalization stocks gained 2.42 to 343.00; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, rose 69.827 to 7,519.287; the American Stock Exchange composite index climbed 4.88 to 552.91; and the S&P; midcap index rose 2.24 to 257.07.

Stocks initially fell after a report that the gross domestic product had its fastest rise in a decade. The Commerce Department reported that the U.S. economy grew at a 5.6 percent rate in the first quarter -- double the pace that Fed policy-makers view as sustainable.

The central bank raised interest rates last month for the first time in two years, and its next policy meeting is set for May 20. Higher rates slow the economy and can hurt corporate profits.

Tomorrow, the government will release its closely watched monthly employment report. "Then we may have a clearer idea of the interest rate picture," said A. Gary Shilling, an award-winning forecaster and president of A. Gary Shilling & Co. "Given the volatility, you're really rolling the dice. I'm on the sidelines. The market can remain irrational much longer than I can remain solvent."

Cisco Systems Inc. was the most active issue of the day, climbing $1.75 to $51.75. The No. 1 supplier of computer networking products gained on each of the past three days, after reaching a 52-week low Friday. Cisco is scheduled to report its quarterly profit on Tuesday.

Exxon Corp. gained $1.125 to $56.75 after the world's largest oil and gas producer raised its quarterly dividend to 41 cents from 39.5 cents.

Seagram Co. gained 50 cents to $38.25 after reporting that fiscal third-quarter earnings more than doubled. The Montreal-based liquor, entertainment and beverage company said quarterly net income rose to $27 million, or 7 cents per share, a penny better than estimates.

Leucadia National Co. rose 75 cents to $30.375 after Conseco Inc. said it will buy a unit of Leucadia for $460 million. Conseco also reported that quarterly profit rose to 59 cents a share, matching estimates. Conseco was unchanged at $41.375.

Apple Computer Inc. fell 68.75 cents to $17 after Oracle Corp. Chairman Larry Ellison said he has decided not to try buying Apple, at least for now.

Tele-Communications Inc. rose 18.75 cents to $13.8125 after the world's largest cable operator said revenue rose a better-than-expected 17 percent in the first quarter, according to preliminary results. TCI's cash flow rose 41 percent.

Lucent Technologies Inc. rose 87.5 cents to $59 after it beat out rival Northern Telecom Ltd. for a multiyear contract to provide as much as $1 billion of wireless network equipment to U S West Communications Group.

Pub Date: 5/01/97

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