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FINANCIAL MARKETS

Inflation News Makes for a Record Day

November 15, 1996|From Times Wire Services

Stocks continued their advance into unexplored territory Thursday, with the Dow Jones industrial average climbing to its seventh consecutive record high on the back of a scintillating market for technology shares.

The Dow finished up 38.76 points at 6,313.00, its first close above 6,300, and it came one month to the day after the Dow first reached 6,000. The Dow has now gained 283.62 points, or 4.7%, since the start of November.

Several broad market indexes broke new ground as well.

"The market has its happy feet on," said Dirk van Dijk, chief equity strategist at C.H. Dean & Associates, which manages $4 billion in assets. "The inflation picture looks good, and there is a feeling the economy is in reasonable shape."

Stocks benefited from a drop in bond yields to eight-month lows on news that retail sales rose a smaller-than-expected 0.2% in October. That report, together with others indicating tame inflation--the Labor Department reported Thursday that the consumer price index rose 0.3% in October--signaled to investors that the Federal Reserve Board won't be under pressure to raise interest rates any time soon so as to keep the economy from overheating.

The technology-heavy Nasdaq composite index gained 9.64 points to 1,270.36, topping its previous record of 1,262.67, set on Monday. The advance came with help from Microsoft, up 4 5/8 to 149 5/8, and Oracle, up 1 7/8 to 47 3/8.

Even on the New York Stock Exchange, technology stocks took the lead. Advanced Micro Devices, up 3 1/8 to 24 3/4, showed the way, rising on news that the chip maker has begun sampling its sixth-generation Microsoft Windows-compatible personal computer microprocessor with key development partners. Tech giant IBM was the second-biggest gainer among the Dow industrials, rising 2 1/8 to 136 7/8. Digital Equipment rose 2 to 33 1/4 after the computer maker's chairman said the company, which posted a fiscal first-quarter loss, could return to profitability.

The NYSE composite index rose 2.10 points to 389.01, and the Standard & Poor's 500-stock index rose 4.75 points to 735.88, both new highs.

The American Stock Exchange's market value index rose 1.05 points to 585.36--well below its record closing high of 614.99, set last May 22.

Gains have also been fueled by a new influx of investment dollars into mutual funds since the Nov. 5 elections confirmed that Democrats and Republicans will continue to split power in Washington--something traders believe will restrain government spending and help reduce the deficit. That and evidence that the economy is growing slowly but steadily and not at an inflationary pace are keeping optimism alive on Wall Street.

"There has been a stampede by buyers and a strike by sellers," said Michael Metz, Oppenheimer & Co. "It will continue until it stops."

Advancing issues led decliners by 3 to 2 on the NYSE.

Stocks and bonds both started the day weaker on mildly negative feeling about economic news. But both markets turned around at midmorning after investors took another look at the data on retail sales, consumer prices and unemployment claims.

The yield on the benchmark 30-year Treasury bond rose in early trading, then fell to an eight-month low of 6.41%, down from 6.46% late Wednesday.

"It was just like somebody flipped a switch," said Arthur Hogan, the senior stock trader at Dean Witter Reynolds. "After digesting the economic news, I assume things didn't look as blurry as they did at the opening."

Among Thursday's highlights:

* Bank shares rallied on falling bond yields. Citicorp rose 2 1/8 to an all-time high of 104 1/8, BankAmerica rose 2 3/4 to 96, Chase Manhattan gained 2 to 88 3/4 and First Chicago NBD rose 1 1/4 to 55 1/8.

* Shares of GTE rose 1 to 43 3/4 amid speculation that the company could announce a merger or alliance in coming days. Traders said AT&T could be a possible partner or buyer. GTE said it doesn't comment on rumors or speculation.

* Santa Monica-based Veterinary Centers of America fell 15/16 to 9 7/16, continuing a downtrend begun Wednesday, and was the most actively traded stock on U.S. exchanges. The company reported a third-quarter loss.

* Land's End Inc. shares rose 2 1/4 to 24 7/8 after the clothing retailer reported better-than-expected third-quarter earnings.

* Tobacco stocks rose on reports that Virginia has joined a legal challenge of President Clinton's proposals for strict new controls on tobacco advertising and sales. Philip Morris gained 3 to 102 5/8, and RJR Nabisco rose 1/2 to 31.

In overseas trading, the Nikkei index in Tokyo rose 0.25%, the DAX index in Frankfurt rose 0.13% and the CAC index in Paris rose 0.04%. The FTSE-100 in London ended off 0.02%.

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