NEW YORK — NEW YORK -- U.S. stocks surged to records yesterday after a government jobs report pointed to stable or lower interest rates and higher corporate profits.
Investors shoveled money into stocks such as American Express Co. and J. P. Morgan & Co. as bond yields tumbled to four-month lows. Financial companies enjoy fatter profits when rates decline.
The jobs report confirmed the view that the economy has slowed enough to keep inflation from rising, yet is growing enough to fuel increases in earnings.
"The financial environment is just incredibly powerful," said Kurt Feuerman, who manages $4 billion for Morgan Stanley Asset Management Inc. and bought American Express shares recently. "You've got strong growth, low inflation and low interest rates."
The Dow Jones industrial average soared 100.43 to a record 7,895.81, paced by American Express' $6.875 gain to $83 amid takeover speculation.
The Standard & Poor's 500 index rose 12.89 to 916.92, its second straight record. The Nasdaq composite index, laden with computer-related companies, surged 12.00 to 1,467.61, also a second record in a row.
In coming days, stocks may have a hard time topping their records. Some investors said prices already take into account any good news that may be contained in second-quarter profit reports to be released over the next few weeks.
For the holiday-shortened week, the Dow gained 2.7 percent and the S&P; 500 climbed 3.3 percent. Stocks got a boost from the Federal Reserve's decision Wednesday to leave interest rates unchanged. The stock market closed at 1 p.m. Eastern time yesterday for the holiday.
Aerospace stocks rose on news that Lockheed Martin Corp. will pay $11.6 billion in stock and debt for Northrop Grumman Corp. The merger signaled that even after a 24 percent rally in stocks this year, companies will pay big premiums to buy competitors.
Northrop Grumman, which makes the B-2 stealth bomber and an array of defense electronics, soared $21 to $109.875. The acquisition is another step in the consolidation that has swept the industry since the end of the Cold War.
Lockheed Martin fell $4.875 to $99.125. Northrop shareholders will receive 1.1923 Lockheed shares for each of their shares, representing a 17 percent premium to Wednesday's closing price.
The merger surprised investors, and they immediately began betting on who the next takeover target would be in the industry.
Litton Industries Inc., which makes navigation and guidance equipment, rose 37.5 cents to $49.50, and United Technologies Corp., the producer of Pratt & Whitney jet engines and Sikorsky helicopters, gained $1.75 to $86.
Missile maker Raytheon Co. rose 75 cents to $53.75; rocket engine maker Thiokol Corp. gained $1.50 to $71.5625; defense electronics concern Tracor Inc. rose $1.875 to $25.75; munitions maker Alliant Techsystems Inc. rose 43.75 cents to $55.50; and nuclear submarine maker General Dynamics Corp. jumped 68.75 cents to $75.625.
The Labor Department said the U.S. economy added 217,000 new jobs in June, fewer than the 230,000 jobs expected by economists. The unemployment rate unexpectedly rose to 5.0 percent in June from 4.8 percent in May. Economists had expected no change.
The Fed has said it will raise interest rates to cool the economy and keep inflation in check if it sees demand for workers pushing wages and prices higher.
Banks were strong on the news. NationsBank Corp. rose $2 to $68.125; First Union Corp. gained $2 to a record $97.25; and Citicorp rose $1.6875 to a record $129.75.
Cereal makers rose after General Mills Inc. raised its breakfast cereal prices an average of 2.6 percent Wednesday. The move could trigger similar increases from other cereal makers and signal an end to their expensive price war.
General Mills gained $2.4375 to $68.1875; Kellogg Co. soared $4 to $91; and Quaker Oats Co. rose 81.25 cents to $45.9375.
PepsiCo Inc. rose 93.75 cents to $38.9375 after the beverage and restaurant company said it expects to have a long-term sales agreement with its Tricon Global Restaurants Inc. unit once the unit is spun off, locking in the business of the second-largest U.S. restaurant company.
The jobs report triggered the biggest bond rally since June 6. The yield on the benchmark 30-year Treasury bond, which moves opposite to the price, dropped to 6.59 percent, a four-month low, from 6.71 percent late Wednesday.
Pub Date: 7/04/97