Wall Street put the 1987 crash anniversary behind it Monday and staged a fairly robust rally, pushing the major market indexes up about 1 percent.
After the close of trading, International Business Machines and Microsoft posted third-quarter earnings per share slightly above the consensus estimate of analysts.
The Dow Jones industrial average gained 74.41 points, to 7921.44, on moderate New York Stock Exchange volume of 483 million shares. Winning stocks held a nearly 2 to 1 edge over losers among NYSE-listed issues.
The Nasdaq composite index rose 18.60, to 1685.45, on the first advance in computer-technology stocks in five sessions. The Russell 2000 index of small-company stocks gained 4.56, to 453.85, also its first gain in five sessions.
Despite some notable disappointments last week, corporate earnings appear to be on track for a slightly better-than-expected third quarter, according to First Call, a Boston-based service that tracks analyst earnings estimates.
AT&T gained $2.31, to $47.50, after its third-quarter earnings beat Wall Street analyst forecasts and it announced Michael Armstrong of Hughes Electronics as the telecommunications giant’s new chief executive officer. Netscape jumped $4.31, to $39.25, on news of a Justice Department action against rival Microsoft, which gained 25 cents, to $132.50.
Last week’s tech wreck, following a troubling earnings announcement by semiconductor giant Intel, finally attracted buy-on-dip investors. Intel, off $10 last week, rebounded $1.06, to $84.06.
“This week is the key week in this quarter’s earnings reporting period,” said Charles Hill, research director at First Call. It now appears likely that companies in the Standard & Poor’s 500-stock index will surpass expectations by 1 or 2 percentage points, thus generating year-over-year results of about 14 percent, he said.
Drugmaker Eli Lilly added $1.87, to $64.62, after beating Wall Street forecasts with its quarterly earnings report. The company agreed with analyst projections that it will earn $1.61 per share in 1997, up from $1.33 last year.
Merger news also provided fuel for the rally. ITT jumped $5.37, to a 52-week closing high $75.75, after the company accepted a friendly takeover bid by Starwood Lodging. Starwood added $1.12, to $57.62. Hilton Hotels, which has been trying to acquire ITT for months, added 56 cents, to $33.
LIN Television gained $1.81, to $52.12, on an acquisition bid by privately held Raycom Media. The Raycom bid tops an earlier bid by Hicks, Muse, Tate & Furst.
Bonds edged higher in quiet trading.
Follow-up: My Sunday column about market analyst Elaine Garzarelli and her new mutual fund failed to mention a phone number for people interested in receiving information about the fund. Normally, I don’t give phone numbers for companies or funds I write about. But to avoid another overload of my voice mail and e-mail, here’s how you can reach the Garzarelli Balanced Fund: 1-800-378-1405.
Local news: Sears Roebuck, Hoffman Estates, continued to fall after last week’s quarterly report, which disclosed unexpected problems in the company’s credit-card unit. Smith Barney lowered its rating on the stock to “neutral” from “outperform.”
Separately, the company’s debt ratings were affirmed by Moody’s Investors Service. Moody’s said that, despite the short-term worry over losses in Sears’ credit-card operation, “Moody’s believes that Sears’ expertise to effectively and prudently manage its credit-card business will, over the long term, stabilize that business.”
The process could take a year or two, however, Moody’s warned. In the meantime, “tightening credit standards or more conservative credit authorization and collection is likely to make it difficult for Sears to generate the same level of sales growth.”
Linking standards for issuing credit cards and top-line growth presents an interesting context in which to gauge this year’s holiday sales at Sears and other retailers. Sixty percent of Sears’ sales are on its own credit card, up from 54 percent in 1992, Moody’s reported.
– Chicago-based truckmaker Navistar declined an NYSE request to comment about unusual activity in its stock Friday and Monday. Shares declined $1.75 Monday, to $23, after falling $2.12 Friday. Daily volume totaled an extraordinary 858,900 shares Friday and 662,600 Monday, well above the recent average daily volume of 382,000. Earlier this month, The Wall Street Journal featured a positive article about a turnaround at Navistar.
– Vysis, a Downers Grove-based maker of clinical diagnosis products, filed with the Securities and Exchange Commission for an initial public offering of 3.5 million shares at an estimated $13 to $15 per share. Furman Selz, Deutsche Morgan Grenfell and Everen Securities are the lead underwriters.
– CS First Boston named Dean Foods, Franklin Park, its featured stock of the week. The shares gained 19 cents, to $48.69.
– Morgan Stanley issued a “strong buy” recommendation on Oak Brook-based McDonald’s, based on the company’s global expansion trend. The stock added $1.50, to $47.75.
– Market Facts, an Arlington Heights-based market research firm, said it expects to post third-quarter earnings per share of 18 cents, up 20 percent from the year-earlier period and slightly higher than the 17 cents forecasts on average by analysts who follow the company.
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MORE ON THE INTERNET: Get Bill Barnhart’s summary of today’s stock market session at 4:30 p.m. at chicago.tribune.com/go/markets
