Earnings News Powers Broad Stock Rally

Stocks continued their resurgence Wednesday, lifting the Dow Jones industrial average to a new high as strong earnings reports sent investors back in search of Internet, drug and other growth stocks.

Helped by a late-day buying wave, the Dow closed up 132.87 points, or 1.3%, at a record 10,581.42. That beat the previous peak of 10,493.89 set last Friday.

The Nasdaq composite index, battered on Monday as many tech and Net shares tumbled, leaped 79.44 points, or 3.3%, to 2,489.08.

“You’re seeing a degree of strength in many of the areas that were hit hard for the past week or more, and that strength is triggered by strength in earnings,” said A. Marshall Acuff, strategist at Salomon Smith Barney.

In particular, drug stocks were in demand after sliding sharply last week and on Monday. Bristol-Myers and Johnson & Johnson both have heartened investors with robust first-quarter earnings reports in the last two days.

Bristol-Myers jumped $5 to $64.25 on Wednesday, while J&J; gained $4.50 to $100.75.

The renewed appeal of growth stocks has dimmed, at least for now, the appeal of heavy-industry shares--many of which are reporting weak earnings for the first quarter but that should perform better later this year assuming the global economy gains steam.

“The market has shifted gears and decided to go with the earnings reports” it has in hand, rather than what might be ahead, Acuff said.

Still, profit taking even in the industrial shares was limited on Wednesday. Alcoa eased 25 cents to $52.63 and Weyerhaeuser was off $2.25 to $65.06, but Caterpillar managed to gain $1 to $61.69.

Many analysts were impressed with the breadth of the rally, which included many long-ignored smaller stocks.

Winners topped losers by a 19-to-11 margin on the New York Stock Exchange and by a 25-to-16 margin on Nasdaq.

The Standard & Poor’s small-stock index shot up 2.4%, far better than the Dow’s gain.

One measure of the widening interest in stocks: Buca Inc., which owns the Buca di Beppo Italian restaurant chain, went public at $12 a share on Wednesday and rocketed to close at $18.25 on Nasdaq.

That’s one of the few non-Internet stocks to get a rousing investor reception in recent months.

Robert Freedman, chief investment officer for the John Hancock Funds in Boston, said the market could continue to rise as first-quarter earnings reports come out. Based on reports so far this week, he said, “it looks like a very good first quarter.”

The bond market is helping stocks, as yields have remained in a tight range in recent weeks.

Among Wednesday’s highlights:

* The shift back into technology was helped by Qualcomm, which soared $54.44 to $195.06 after the San Diego-based maker of digital-wireless technology reported first-quarter operating income of 82 cents a share--well above analysts’ expected 59 cents.

Also, after the market closed IBM reported earnings far above expectations. The stock rose $2.13 to $171.88 in regular trading.

Also rising were Intel, up $1.88 to $58.44, and Hewlett-Packard, up $3.75 to $75.13.

But poor earnings reports or earnings warnings sent Cadence Design down $8.31 to $12.50 and NCR down $8.69 to $44.63.

* Internet stocks roared again, with America Online gaining $14.06 to $142.75, CMGI up $40.75 to $246.75, and Go2Net up $29.38 to $177.50. After the close of trading, Go2Net said fiscal second-quarter revenue more than doubled and that earnings were 7 cents a share, beating expectations by 5 cents.

In the Internet brokerage arena, Knight-Trimark, a major wholesaler of online trades, soared $33 to $119.75 after saying quarterly earnings rocketed 344%. It also announced a 2-for-1 stock split. Charles Schwab, the leading online broker, rebounded $11.25 to $118.

* Many consumer stocks rose after Coca-Cola beat earnings expectations. Its shares jumped $2.31 to $67.56. Rival PepsiCo gained $1.81 to $38.94 and Anheuser-Busch zoomed $2.75 to $74.94.

In U.S. commodity trading, oil keeps getting more expensive: Crude futures rose more than 2% to a 16-month high, as a larger-than-expected drop in U.S. inventories and reduced supplies from Venezuela signaled that producers are succeeding in efforts to erode an oil surplus.

U.S. inventories fell for the first time in seven weeks, the American Petroleum Institute said. And Venezuela, OPEC’s third-largest producer, said a pipeline explosion will reduce its output for two weeks.

June oil futures rose 44 cents to $17.92 a barrel in New York.

Market Roundup, C9