U.S. Stocks Rise on AT&T's Purchase of TCI, Boosting Equipment Makers

Strategic Insights -

Investors anticipating increased demand for telecommunications equipment saw U.S. stocks rally Wednesday, with the Dow Jones industrial average rising 95.41 to 8,923.87. The acquisition by AT&T Corp. of Tele-Communications Inc. (TCI) sparked expectations of a more competitive industry, driving shares of equipment makers such as Lucent Technologies Inc. and ADC Telecommunications Inc. higher. Analysts at John Hancock Funds pointed to the potential for telephone, Internet, and broadband services to be delivered through bigger "pipes" as a result of TCI's rollout. Microsoft Corp.'s 22% gain over the past nine days, driven by the upcoming release of Windows 98 operating system, also contributed to the market's upward momentum.

Key Takeaways:

  • U.S. stocks rose on Wednesday, with the Dow Jones industrial average increasing 95.41 to 8,923.87.
  • The acquisition by AT&T Corp. of Tele-Communications Inc. (TCI) drove expectations of increased demand for telecommunications equipment.
  • Analysts at John Hancock Funds, which oversees $35 billion, recommend buying equipment stocks such as Lucent Technologies Inc., ADC Telecommunications Inc., and Northern Telecom Ltd.
  • Microsoft Corp.'s 22% gain over the past nine days, driven by the upcoming release of Windows 98 operating system, contributed to the market's upward momentum.
  • The Standard & Poor's 500 Index rose 13.39 to 1,132.88, while the Nasdaq Composite Index, loaded with telecommunications equipment stocks, rose 33.19 to 1,877.76.
  • Equipment makers such as Lucent Technologies Inc., ADC Telecommunications Inc., and Scientific Atlanta Inc. rose significantly, driven by increased demand expectations.
  • Tele-Communications Inc. rose 41 7/16 to 2 3/4, while AT&T itself dropped 4 11/16 to 60 11/16, after warning that the acquisition will hurt its earnings for three years.

Statistics:

  • Dow Jones industrial average: 8,923.87 (up 95.41)
  • Standard & Poor's 500 Index: 1,132.88 (up 13.39)
  • Nasdaq Composite Index: 1,877.76 (up 33.19)
  • Microsoft Corp.: 22% gain over the past nine days
  • Lucent Technologies Inc.: rose 2 5/8 to 81 1/16
  • ADC Telecommunications Inc.: rose 3 3/16 to 35 13/16
  • Tele-Communications Inc.: rose 2 3/4 to 41 7/16
  • AT&T Corp.: dropped 4 11/16 to 60 11/16

Sources:

  • Bloomberg News
  • John Hancock Funds
  • AT&T Corp.
  • Tele-Communications Inc.
  • Microsoft Corp.
  • Standard & Poor's
  • Nasdaq Inc.