NEW YORK -- U.S. stocks rose to records yesterday on optimism that corporate profits will grow the rest of the year.
"There's a lot of euphoria in the market, with low interest rates, the recent capital gains tax cut, and strong earnings," said Steve Enos, who helps oversee $38 billion as a money manager at Wells Capital Management in San Francisco. "The trends, which make it more compelling to own stocks, are all intact."
The Dow Jones industrial average rose 71.77, its biggest gain in a week, to a record 8,259.31, led by American Express Co.
Apple and Microsoft led the Nasdaq composite index to its sixth straight record, gaining 8.91 to 1,630.44. The Standard & Poor's 500 index gained 7.95 to 960.32, led by General Electric Co. and Exxon Corp.
Large stocks, as measured by the S&P;, are up 45 percent in 12 months and 130 percent in five years. Corporate profits for those companies grew 12.8 percent in the second quarter.
Among broad market indexes, the Russell 2,000 index of small capitalization stocks rose 2.41 to 420.73; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, jumped 69.88 to 9,110.42; the American Stock Exchange composite index advanced 3.41 to 654.06; and the S&P; 400 midcap index added 2.27 to 319.10. All were records.
The yield on the benchmark 30-year Treasury bond fell two basis points to 6.47 percent.
Bank stocks advanced after Morgan Stanley, Dean Witter, Discover & Co. analyst Arthur P. Soter raised his 12-month target for Citicorp, BankAmerica Corp. and Chase Manhattan Corp. Citicorp gained $5.25 to a record $139.875; Chase rose $2.1875 to $111.75; and BankAmerica gained 87.5 cents to $72.75.
BankBoston Corp. rose $2.9375 to $87.375 and First Empire State Corp. was up $4 to $369, both new records.
About nine stocks rose for every five that fell in New York Stock Exchange trading of 565 million shares.
Apple, the most active issue in U.S. markets, soared $6.5625 to $26.3125, after Microsoft said it will buy a $150 million nonvoting stake in the computer maker. Microsoft gained 12.5 cents to $143.4375.
Cisco Systems Inc., the networking equipment bellwether, fell $1.5625 to $80.375. The company said after the market closed yesterday that fiscal fourth-quarter profit rose 34 percent, matching expectations. Cisco Chief Executive John Chambers made cautious comments about the European market and Cisco's Stratacom division, which makes networking switches.
IBM rose $1.375 to $107.875.
GE gained $1.5625 to $69.3125.
"There's so much power in the technology group that it has overpowered all forces of reason," said Edward Laux, head of U.S. equities at ABN-Amro Chicago Corp. "Technology is lifting all the ships."
ITT Corp. gained $1.8125 to $64.75, after Hilton Hotels Corp. said it boosted its hostile takeover bid to $70 in cash and stock. Hilton closed down $1 at $31.75.
PG&E; Corp. lost 18.75 cents to $24.125 after it said it will buy 18 power plants from New England Electric System for $1.59 billion in cash.
Investors say while they regard many stocks as expensive, they remain optimistic as long as profits grow and interest rates stay relatively low.
Low rates make borrowing money less expensive and usually spur economic growth. Low rates also make stocks more attractive, relative to other investments.
"We don't see a trigger that would cause over-valuations by themselves to take the market down," said Thomas Angers, an analyst with the Glenmede Trust Co. of Philadelphia, which oversees $10 billion.
"It's very rare for the market to fall when interest rates are going down," he said.
Pub Date: 8/07/97