NEW YORK -- U.S. stocks rose to records yesterday on optimism that lower interest rates will help corporate earnings expand. Banks such as J. P. Morgan & Co. and Banc One Corp. led the advance.
The Dow Jones industrial average closed 11.05 higher at 8,038.58, after erasing a 115-point gain and tumbling 71 points. Growing tensions in the Middle East sent the price of oil to an eight-month high, briefly sending jitters throughout the stock and bond markets that inflation may not remain dormant for long.
The Standard & Poor's 500 index gained 4.57 to a record 965.03. The Nasdaq composite index rose 13.46 to a record 1,715.87.
For the week, the Dow gained 116.4 points, or 1.5 percent. The 30-stock average is 220 points away from its all-time high of 8,259.31, set Aug. 6.
The Russell 2,000 index of small stocks advanced 2.58 to 459.52 yesterday, its fifth straight record. -FileNet Corp. was the biggest gainer, rising $6.50 to $22.75 on optimism that new management and products will lead to a turnaround in earnings.
Small stocks stepped up to lead the U.S. stock market during the third quarter, outpacing large stocks by the widest margin since the fourth quarter of 1992, according to Frank Russell Co. The Russell 2,000 posted a total return of 14.9 percent for the quarter.
Other broad market indexes also set records yesterday. The Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, jumped 53.26 to 9,340.08; the American Stock Exchange composite index added to 709.92; and the S&P; 400 mid-cap index gained 1.69 to 336.00.
Yesterday's jump in oil prices overshadowed an unexpectedly weak September jobs report, which investors interpreted to mean that growth isn't about to speed inflation.
The yield on the benchmark 30-year Treasury bond fell 2 basis points to 6.28 percent, after initially touching a 19-month low of 6.19 percent -- still 8 basis points below where it began the week.
"We saw a little too much enthusiasm about the economic news early in the day," said Paul Hennessey, head trader at Boston Partners Asset Management, which oversees $12.5 billion. "Stocks moved back in lockstep with bonds."
Advancing stocks outpaced decliners by a margin of 9 to 5 on the New York Stock Exchange, where about 619 million shares changed hands, above the recent average of 531 million.
Bank shares held on to much of their gains. Banc One climbed $2.25 to $59.0625; J. P. Morgan jumped $4.5625 to $119.50; Citicorp rose $2.4375 to $137.6875; and BankAmerica Corp. gained $1.50 to $78.0625.
Oil shares got a boost from the rally in crude oil prices. Crude rose 99 cents a barrel to $22.76 on concern that supplies from the Middle East could be disrupted.
Amoco Corp. jumped 93.75 cents to $97.4375; Exxon Corp. climbed 25 cents to $65.1875; and Texaco Inc. rose 31.25 cents to $60.875.
Boeing Co., a member of the Dow average, dropped 50 cents to $52. The company said it was closing production of its 747 passenger jet to let suppliers catch up on orders and expects to deliver 335 of the planes this year, down from an original estimate of 340 to 350 planes.
For a third day, WorldCom Inc. was the most-active stock in U.S. trading, rising 18.75 cents to $38.0625 in trading of 30.5 million shares. The company announced a plan Wednesday to buy MCI Communications Corp. for $34.5 billion, and investors are betting that the transaction will go through. MCI fell 43.75 cents to $36.1875.
Paine Webber Group Inc. rose $3.875 to $50.75 on speculation that the firm will be acquired by Goldman, Sachs & Co. Both companies denied that a transaction will occur.
Pub Date: 10/04/97