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FINANCIAL MARKETS : Profit Reports Boost Stocks; Yields Climb

October 20, 1994|From Times Staff and Wire Services

Strong third-quarter corporate profit reports helped Wall Street spark to life Wednesday, despite a weak bond market and another selloff in the dollar.

The Dow Jones industrial average gained 18.50 points to 3,936.04, closing within 42 points of its all-time high of 3,978.36 reached last winter.

More important, the broad market also rallied, after limping along Monday and Tuesday. The Standard & Poor's 500 index jumped 2.62 points to 470.28 and the Nasdaq composite index of mostly smaller stocks leaped 5.81 points to 770.62.

On the New York Stock Exchange, winners edged losers 1,099 to 1,015, as volume shot up to 319 million shares. Nasdaq winners topped losers by a 15-13 margin.

"It's just an accumulation of good corporate earnings reports," said Jack Shaughnessy, director of research at Advest, commenting on what fueled buyers' interest. Earnings are "proving to be the overriding consideration" now, he said.

Stocks headed lower at the open as bond yields rose, reacting to the government's report on the nation's trade deficit in August. Although the deficit overall was lower, Japanese imports to the United States surged to a record high.

James Schroeder, MMS International market analyst, called the trade report "an indication of continued economic strength."

With bond investors still fearing another Federal Reserve Board credit-tightening move this fall, any report of economic vitality can bring out sellers--driving yields up anew.

Another jump in key commodity prices also spooked the bond market Wednesday, traders said. Copper, lumber, gold and oil, among other commodities, rose in futures trading, and the Commodity Research Bureau index of futures advanced 1.44 points to 231.17.

Still, bond yields retreated somewhat later in the day, and the 30-year Treasury bond yield closed at 7.89%, compared to 7.86% on Tuesday.

With the bond market stabilizing, stock investors returned their focus to corporate earnings reports and found plenty to cheer about, analysts said. Stocks rising strongly on earnings reports included Digital Equipment, Amgen, Johnson & Johnson and Alaska Airlines.

Institutional Brokers Estimate System, which tracks earnings, said that as of Wednesday, 57% of the major companies reporting so far this quarter have exceeded Wall Street average estimates.

Nonetheless, many Wall Streeters remain bearish on stocks. Investors Intelligence newsletter's weekly poll of market newsletter writers found 53.8% bearish this week, the highest bear percentage since Jan. 25, 1991.

Among Wednesday's highlights:

* Tech stocks renewed their rally, helped by earnings reports. Compaq rose 1 1/8 to 36 5/8 after saying third-quarter net income rose to 75 cents a share from 42 cents a year ago.

Digital Equipment jumped 1 7/8 to 31 1/4. It said its first-quarter net loss narrowed to 98 cents a share, compared to $1.14 a year earlier.

Other tech winners included Intel, up 1 3/4 to 60; Motorola, up 1 5/8 to 56 1/8; Texas Instruments, up 1 7/8 to 70; Cirrus Logic, up 1 5/8 to 29 3/4, and IBM, up 7/8 to 75 3/8 as analysts anticipated a good third-quarter earnings report due today.

* In the health sector, Thousand Oaks-based biotech giant Amgen surged 4 1/16 to 58 after it reported quarterly earnings up 11%, exceeding estimates. The firm also said it is confident it will report full-year 1994 results at the top of Wall Street's expectations of $3 to $3.10 a share, and 1995 results near $3.70 a share.

In currency markets, the dollar fell to within a yen of its all-time low against the Japanese yen on news of the August trade data.

In New York, the dollar closed at 97.25 yen, down from 97.81 late Tuesday. Immediately following the trade report, the dollar tumbled to a session low of 96.75 yen, just shy of its post-World War II low of 96.60. Against the German mark, the dollar was quoted at 1.5016, down from 1.5025 on Tuesday.

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