Surging Bond Prices Fuel Stock Market Rally

Stocks rallied Tuesday, reversing Monday’s slide as bond prices surged.

A slew of upbeat corporate earnings reports and a stronger U.S. dollar also played a role in the day’s action. Blue chip stocks gained the most, erasing a retreat on Monday fueled by currency worries and roiled overseas markets.

The Dow Jones industrial average rose 28.18 points to end at 4,783.66.

Declining issues outnumbered advancers by about 10 to 9 on the New York Stock Exchange.

Volume on the floor of the Big Board came to 415.45 million shares as of 4 p.m., up from 329.72 million in the previous session.

With no economic reports out Tuesday, investors focused on the bond market, a steadier U.S. dollar and a number of positive earnings reports, analysts said.

“The bond market is very strong, reviving hopes for a cut in interest rates,” said Michael Metz, investment strategist at Oppenheimer & Co. in New York. “That’s what’s fueling the market.”

Some of the stocks that moved substantially or traded heavily Tuesday:

NYSE

UAL, up 4-1/4 to 175. Third-quarter profits at the parent of United Airlines nearly tripled compared with a year ago.

RJR Nabisco, down 2-5/8 to 29-1/4. In a conference call with analysts, the tobacco company said its 1995 and 1996 earnings would not meet expectations.

Digital Equipment, up 1 to 53-1/2. The computer maker earned $48 million during its fiscal first quarter, reversing a year-earlier loss.

Burlington Northern, up 5-3/4 to 82-5/8. The railroad told analysts that it expects $400 million to $500 million in savings from its merger with Santa Fe.

Gucci Group, 26-3/4 (new issue). The luxury goods retailer’s first sale of public stock exceeded its initial offering price of 22.

NASDAQ

Cytrx Corp., down 1-9/16 to 1-3/16. Glaxo Wellcome said it will end licensing of its heart attack drug.

MCI Communications, unchanged at 24-5/8. The long distance company reported a $240 million third-quarter loss on Monday.

Boston Chicken, up 2-1/8 to 32. The company posted an 88.4 percent rise in its third-quarter net income on a rise in sales and franchise fees.

AMEX

Imperial Thrift, 11-1/2 (new issue). Shares were initially offered at 10 as part of a plan to meet regulatory capital requirements.