Dow Soars 30.86 to Top 3,000 on Economic Data
Favorable economic reports Thursday sent the stock market soaring for the third day running, pushing the Dow Jones industrial average above the psychologically important 3,000 mark and to its second-highest close ever.
Wall Street staged a strong rally that sent the Dow up 30.86 points, or 1%, to close at 3,000.45. More than 234.4 million shares traded hands on the New York Stock Exchange--the highest volume in six weeks and another measure of the market’s strength.
In late afternoon, the Dow was up as much as 40 points before falling just under 3,000 near the close. Almost exactly at the closing bell, the index managed to inch back over 3,000, for only the second close above that mark in history.
The Dow’s first over-3,000 close--3,004.46 on April 17--remains the index’s all-time high.
“The market is telling us that the recession is over and an upturn is starting,” said Ralph Bloch, technical analyst at Raymond James & Associates.
Thursday’s optimism was sparked by several positive economic reports. The government reported that new-home sales rose during April for the third consecutive month, jobless claims were down and personal income was up.
Better still, analysts are betting that there will be a big boost to corporate productivity during the early stages of the economic recovery because companies restructured, laid off workers and otherwise became “leaner and meaner” to survive the recession.
Stocks were also helped by a strong bond market Thursday. Yields fell on Treasury bonds as investors sought to lock in high rates. The yield on the Treasury’s 30-year bond dropped to 8.21% from 8.29% on Wednesday.
On Wall Street, industrial stocks continued to lead the market, as they have for the past week, on the belief that they will be first to benefit from an economic rebound.
“The signs are very encouraging,” said Hugh Johnson, chief investment officer at First Albany in New York. “Every day investors become more optimistic that we will see a turn in corporate earnings, and corporate earnings are what the stock market is all about.”
Nevertheless, there are still some questions about how strong the economic recovery might be and whether it will last. The biggest question is whether consumers will start spending, since consumer spending accounts for two-thirds of economic growth. Government statistics released Thursday indicated that consumer spending fell slightly in April from month-ago levels.
But economists said the March figures were inflated by an unusually large boost in durable goods orders, which made the month-to-month comparisons less telling.
Overall, spending has been trending upward since January, Johnson said. However, the upticks have been relatively modest.
Among the market highlights:
* Industrial stock gainers included GE, up 1 7/8 to 76 1/2; Deere, up 2 to 54 3/8; Georgia Pacific, up 2 to 55 1/4; Illinois Tool Works, up 2 1/4 to 63, and Monsanto, up 2 5/8 to 69 1/8.
Many smaller industrial names also gained, including such Southland firms as filter-maker Farr Co., up 3/4 to 12 3/4, and plastics firm Cimco, up 3/4 to 11 1/2.
* Many financial services companies also gained on hopes for a continued drop in interest rates and for a continued housing turnaround. Federal Home Loan Mortgage rose 1 1/2 to 88 3/8, Countrywide Credit jumped 1 to 23 3/8, Federal National Mortgage was up 1 5/8 to 50 3/4, and Ahmanson rose 7/8 to 19 1/4.
Among home builders, Standard Pacific rose 5/8 to 11 1/8, Kaufman & Broad added 1/2 to 15 3/4, and Ryland jumped 1 to 21 1/2. But J. M. Peters sank 5/8 to 2 3/8 after reporting a huge loss.
* Among entertainment stocks, Circus Circus soared 4 5/8 to 77 3/8 after the casino firm reported strong quarterly earnings, helped by high occupancy at its Las Vegas casino, Excalibur. Also rising was Caesars World, up 1 5/8 to 24 1/8.
But Disney dropped 2 to 116 3/4 as analysts cut earnings estimates further, citing an ongoing attendance slump at the company’s theme parks and mediocre returns on its current movie lineup.
* Pepsico fell 1/2 to 31 5/8 on high volume of 3.77 million shares. Heavy rains have spoiled much of the Florida chipping potato crop, which will mean the company’s Frito Lay Snack Foods unit will have to pay more for potatoes.
In overseas trading, London stocks eased, as the Financial Times 100-share index closed down 1.7 points to 2,491.2. The Frankfurt exchange was closed for a holiday.
In Tokyo, the Nikkei index rose 151.99 points to 25,647.40.
In Mexico City, the Bolsa index closed at another record high, up 4.53 points to 1,089.64.
Credit
Long-term Treasury bond prices jumped sharply following technical trading in newly auctioned two-year notes.
Many analysts were surprised at the performance of the 30-year T-bond, which rose 13/16 point, or $8.13 per $1,000. Its yield fell to 8.21% from 8.29% Wednesday.
Some traders said demand for the 30-year bonds was a technical trading exercise related to the sale of two-year T-notes last week.
The federal funds rate, the interest on overnight loans between banks, was quoted at 5.81%, up from 5.50% late Wednesday.
Currency
The dollar settled mostly higher, supported by the rise in stock and bond prices.
Trading was somewhat light earlier in Europe, with German banks closed for a national holiday. The dollar moved on technical factors until talk of a large buy order prompted a brief flurry of buying late in the session.
In New York, the dollar bought 1.720 German marks, up from Wednesday’s close of 1.714. It fell against the Japanese yen to 137.80 from 138.10 Wednesday.
Commodities
Gold futures advanced on New York’s Comex, erasing most of Wednesday’s losses.
Gold finished $1.90 to $2.50 higher, with June at $363.10 an ounce; silver was 0.1 cent lower to 0.1 cent higher, with June at $4.14.
Oil futures moved higher on the New York Mercantile Exchange, with refined products leading the way on reports of refinery troubles in France and Venezuela.
Light, sweet crude oil was 31 cents higher across the board, with July at $21.32 a barrel.
