Drug, financial shares lead market gains

Journal Record, The (Oklahoma City), Nov 5, 1999

NEW YORK (AP) -- Stocks closed mostly higher Thursday after a bidding war over Warner-Lambert enlivened the drug sector and financial shares rose on the latest sign that inflation is under control.

The Dow Jones Industrial Average rose 30.58 to close at 10,639.64.

Broader stock indicators were also higher. The Nasdaq composite index rose 27.44 to 3,055.95, its fifth consecutive record close. The index, which closed above 3,000 for the first time on Wednesday, has benefited from renewed optimism about the economy and interest rates.

The Standard & Poor's 500 rose 7.71 to 1,362.64.

Investors focused on drug stocks for a second straight session after Pfizer made a surprise bid to acquire Warner-Lambert for $82.4 billion. Just Thursday morning, Warner-Lambert and American Home Products confirmed plans to merge in a $71 billion deal.

Warner-Lambert soared 6.1875 to 90 as investors hoped to capitalize on a bidding war, while Pfizer fell 1.25 to 37.3125 and American Home Products fell 1.1875 to 54.8125. Currently, Pfizer's offer stands at $96.40 per share, while the deal with American Home Products values Warner-Lambert at $83.55 a share.

Most other pharmaceutical makers rose as well, as investors looked forward to more combinations in the industry. Eli Lilly gained 4.25 to 76.125.

Financial stocks also rose amid a growing sense that inflation remains muted. The Labor Department said the number of Americans filing new claims for unemployment benefits rose to 288,000, up 8,000 from the previous week.

The report helped ease fears that companies will be forced to sharply boost wages and benefits to hold on to skilled employees.Still, analysts expect investors to focus more intensely on Friday's report on unemployment and wages for the month of October.

Escalating wages and benefits could prompt the Federal Reserve to raise interest rates when its policy-making committee meets Nov.16, analysts say.

"Friday's numbers could go a long way toward swaying the Fed," said Larry Rice, chief investment officer at Josephthal & Co. The report, he argued, kept many potential buyers out of the market Thursday.

"It's understandable that investors don't want to take a major new position until they see that report," he said.

Still, banks and brokerages, which gained in recent sessions as investors began to believe the Fed might leave rates unchanged, rose again Thursday. J.P. Morgan rose 4.375 to 133.5, leading the Dow.

Stocks received some additional support from Abby Joseph Cohen, the famously bullish chief investment strategist at Goldman Sachs. Speaking at the Securities Industry Association's conference in Boca Raton, Fla., Cohen said she expects solid corporate profit growth and little risk of inflation in 2000.

Cohen also suggested that whatever course the Fed chooses at its Nov. 16 meeting, stocks will be unaffected.

"If the Fed decides to raise rates, that increase is already discounted" in the markets, she said.

Advancing issues outnumbered decliners by a 10-to-9 margin on the New York Stock Exchange. Volume of all listed shares totaled 1.20 billion shares, compared with 1.11 billion in the previous session.

The Russell 2000 index of smaller companies rose 1.44 to 439.90.

In Europe, stock prices were mostly higher despite interest rate increases announced by the Bank of England and the European Central Bank. Analysts said the increases were largely expected.