NEW YORK — NEW YORK -- U.S. stocks rose yesterday as declining interest rates boosted the profit outlook for J. P. Morgan & Co. and other banks. Software shares dropped, limiting the market's gains.
Stocks followed bond prices higher after a private manufacturing survey suggested the economy isn't growing fast enough to prompt the Federal Reserve to raise rates today as an anti-inflation measure. Steady or falling rates and rising earnings have underpinned this year's 20 percent rally in stocks.
"It can't get much better, but I think it can continue to be good for some time," said Lee Kopp, president of Kopp Investment Advisers, which manages $3.3 billion.
The Dow Jones Industrial Average rose 49.54 to 7,722.33, after briefly dropping 5 points late in the session. J. P. Morgan, the third-most heavily weighted stock in the average, rose 2.875 to 107.25, rebounding from Monday's $2.375 drop. The company's securities and investment management businesses benefit from lower rates.
The Standard & Poor's 500 Index rose 5.89 to 891.03. Oil companies led the index higher as crude oil prices rose above $20 a barrel for the first time in four weeks. Exxon Corp. rose $2 to $68.25, Chevron Corp. rose $1.50 to $75.4375 and Amoco Corp. gained $1.9375 to $88.875.
About four stocks advanced on the New York Stock Exchange for every three that fell. About 544 million shares changed hands on the Big Board, above the three-month daily average of 490 million shares.
Banks helped boost the broad market as bond yields fell, brightening the outlook for their profit margins.
BankAmerica Corp. rose $1.8125 to $66.375, NationsBank Corp. rose 81.25 cents to $65.375, Citicorp jumped $2.75 to $123.3125 and Bank of New York Co. rose $1.0625 to $44.6875.
Bond yields fell after the National Association of Purchasing Management said its factory index declined to 55.7 last month from 57.1 in May. Analysts expected 56.1. A reading of 50 or more indicates expansion.
Coca-Cola Co., a member of the Dow, rose 62.5 cents to $68.625. The company said it expects second-quarter worldwide case sales to rise 7 percent to 8 percent, led by growth in Latin America and Asia.
Coke also said it will record a $200 million gain on the sale of a Philippines bottling unit.
Boeing Co., also part of the Dow, rose $1 to $54.0625 after winning antitrust clearance from U.S. regulators for its $15 billion purchase of McDonnell Douglas Corp. Also, Lehman Bros. named Boeing one of its top 10 stock picks for the coming year.
Warnings of lower profits and apprehension about the traditional summer slowdown hurt software and semiconductor companies.
"You're getting into a period where seasonally these stocks have had some trouble," said Charles White, a portfolio manager for Avatar Associates, which manages $4 billion. "Europe is a major driver of business for these guys and unlike in the U.S., everybody just goes on vacation there and nobody's buying anything."
The industry's largest companies declined. Intel Corp. fell $2.75 to $139.0625, Microsoft Corp. lost $1.4375 to $124.9375, Oracle Systems Corp. dropped $1.8125 to $48.5625 and Computer Associates Inc. declined $1.50 to $54.1875. The Nasdaq composite index, which is laden with computer-related companies, fell 3.82 to 1,438.25.
The declines in computer and communications stocks sent the Russell 2000 small-company index down 2.24 to 394.13.
The rally in U.S. equities followed record-setting gains around the globe. Stock markets in France, Germany, Spain, Austria, Finland, Italy, Norway, Sweden, Ireland, Portugal and Russia closed at records yesterday.
To be sure, many investors are worried that U.S. stocks have risen too far in the rally this year, and say prices need to fall.
Pub Date: 7/02/97