The healthcare sector led the charge, boosted by strong gains in the HMO and biotechnology groups. Technology issues also made big strides, paced by hefty rises in Internet shares.Banking and brokerage sectors, two areas hit recently by worries over exposure to hedge fund losses and Latin American instability, made a strong showing.
Some market observers would like nothing more than for the market to move sideways for a while to digest its giant run-up.
"The healthiest thing for the market would be to come back down and continue this consolidation process for at least a few more months," said Louise Yamada, senior technical analyst at Salomon Smith Barney.
"I think the market's a bit ahead of itself here," said Jim Pizzo, market strategist at CIBC Oppenheimer. "Rather than seeing the market break through here on the upside, I would prefer to see some consolidation at these levels. That would be healthier."
Pizzo notes that, on average, the biggest stocks in the S&P 500 index trade between 25 and 26 times 1999 earnings estimates, rich levels by historical standards. "It's tough to make an aggressive case on those stocks when you're already at those multiples."
On Wednesday, Brazil announced the details behind its $84 billion fiscal package of spending reductions and tax hikes. The plan is expected to pacify the International Monetary Fund, leading to a $30 billion IMF aid package.
Uncertainty over the plan nudged some on Wall Street to book profits earlier in the week. Some had worried Brazil might devalue its currency, possibly igniting similar moves by other developing nations.
With nearly 80 percent of the biggest U.S. corporations already having reported third-quarter earnings, investors' focus drifted back to the outlook for the economy and interest rates.
The government Thursday said the employment cost index rose 1.0 percet in the third quarter and 3.7 percent on a year-over-year basis. The figures exceeded most economists' estimates of 0.8 percent and 3.7 percent, respectively.
The ECI is a key gauge of labor costs in the U.S. economy and measures growth in wages, salaries, and employer benefit costs. Since labor comprises two-thirds of the cost of producing goods, any barometer of wage growth is scrutinized carefully by the Federal Reserve and Wall Street for clues as to increases in retail price inflation.
"The ECI number does not look so bad, but the point is that employment cost pressure is clearly trending higher," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd.
But financial markets paid scant attention to the economic report.
In Thursday's market indicators:
- The Standard & Poor's 500 Index rose 1.7 percent.
- New York Stock Exchange advancing issues sidled past decliners by more than 3 to 2. New 52-week highs totaled 42. There were 31 new 52-week lows.
- On the Big Board floor, turnover grew 4 percent to 699 million shares.
- The Nasdaq Composite advanced 1.1 percent. Advancing issues led decliners by more than 11 to 8 in the Nasdaq Stock Market, with 38 new highs and 55 new lows. Volume totaled 893 million shares.
- The Russell 2000 Index of small-company stocks gained 0.8 percent. The index lagged its blue-chip counterparts for only the third time in the last 10 days.
- In the bond market, the 30-year Treasury rose 26/32, to yield 5.081 percent.
Among the stocks in the news Thursday:
- Ciena (CIEN) vaulted 3 3/16, or 26 percent, to 15 7/16 on speculation that it might reveal several large contracts with Baby Bell phone companies at an investment conference in Boca Raton, Fla., next week. The maker of telecommunications gear has been the subject of takeover speculation lately.
- Amazon.com (AMZN) tacked on 9 7/16 to 126 1/2. After the close of Wednesday's trade, the electronic book and compact disc seller said it recorded a third-quarter pro forma operating loss of 49 cents a share vs. most forecasts of a 57-cent-a-share deficit. It said cumulative customer accounts skyrocketed 377 percent over the same quarter of 1997. Revenues rose 306 percent over the year-ago period and 33 percent from the second quarter. Repeat customers accounted for 64 percent of all orders.
- CBS Corp. (CBS) added 2 5/8 points to 28. In the third quarter, the media concern broke even on its continuing operations, up from the 3-cent-a-share loss in the 1997 period. Wall Street had expected a loss of 1 cent a share, according to First Call Inc. Revenues rose 23 percent. The company announced that Chairman and Chief Executive Officer Michael Jordan will resign at the end of this year. President and Chief Operating Officer Mel Karmazin will move up to CEO. (CBS Corp. holds a 50 percent stake in CBS.MarketWatch.com.)
- MCI WorldCom (WCOM) declined 7/16 to 54 12. It rolled out third-quarter operating earnings of 21 cents a share. That met the Street's consensus. A year ago, earnings amounted to 7 cents. Revenues increased about 97 percent.
- Reader's Digest (RDA) reported operating earnings of 2 cents a share vs. a 5-cent-a-share loss last year, beating Street estimates of a cent. The magazine publisher expects modest improvement in the fiscal 1999 year. The news propelled the shares up 1 13/16 to 20 1/4.
- Pharmacia & Upjohn (PNU) moved up 2 3/16 to 50. Third-quarter operating net of 41 cents a share matched the Street's consensus view. It earned 35 cents in the third quarter of 1997. The Swedish drugmaker said the turnaround in its operations is on track.
- Republic Industries (RII) climbed 1 9/16 to 16 11/16. It met most analysts' estimates with its third-quarter results of 38 cents a share, a dime better than a year ago. The company indicated it is "comfortable" with the Street's fourth-quarter estimate of 27 cents a share. Republic is a holding company with interests in the automobile retail, automobile rental, and solid waste industries.
- Managed healthcare provider Humana (HUM) added 1 3/4 to 18 1/8. It netted 32 cents a share on an operating basis in the third quarter, equal to Street views, and above the 27 cents of a year ago. Sales rose 26 percent; net income 93 percent. In a conference call with analysts, the company's chief executive anticipates earnings growth of 20 percent to 25 percent in 1998 and 15 percent to 20 percent in 1999.
- Widely-held computer-related issues remained favorites. International Business Machines gained 2 5/16 to 148 1/2, EMC 3 3/8 to 65 3/4, Applied Materials 1 1/4 to 35 7/16, and Sun Microsystems 2 1/16 to 58 3/4.
- Biotechnology stocks maintained their scorching pace, with Biogen up 3 3/8 to 72 7/16, Centocor 3 1/2 to 44 5/8, Amgen 2 1/8 to 79 3/8, Genzyme 2 3/4 to 42 9/16, and Immunex 2 1/2 to 69 13/16.
- Internet shares continued to ride the wave of better-than-expected earnings results after Amazon.com's Street-beating report. Lycos picked up 4 1/2 to 42 15/16, Yahoo! 4 7/16 to 131 3/16, EarthLink Network 2 9/16 to 39 3/16, America Online 4 3/16 to 128 5/16, CMG Information Services 4 3/4 to 57 3/4, and DoubleClick 2 3/8 to 30.