FINANCIAL MARKETS : Dow Surges 51; Yields Decline as Dollar Rises
The stock market shot higher for the second time in three days after a government report showed second-quarter economic growth was weaker than expected, easing concern about inflation and higher interest rates.
A market-wide rally began at the opening bell after the Commerce Department said the second-quarter gross domestic product growth was revised upward less than expected, to 3.8% from 3.7% a month earlier.
The news sent bond yields tumbling and brought a wave of new buyers into the stock market.
The Dow Jones industrial average, which soared 70.90 points Wednesday, rose 51.16 points to close at 3,881.05 on Friday.
It was the highest level for the Dow since it reached 3,895.65 on March 18, just before the market went into its spring free fall on worries about rising interest rates.
For the week, the Dow gained 125.94 points, or 3.4%.
The blue chip index was up as much as 65 points at one point Friday, prompting the New York Stock Exchange to impose standard “circuit breaker” restrictions on computerized program trades shortly before noon.
Analysts noted that the breadth of Friday’s advance was far better than Wednesday’s, when most key indexes significantly lagged the Dow.
Advancing issues outnumbered decliners by 15 to 7 on the NYSE on Friday in active trading of 305.6 million shares.
The Standard & Poor’s 500-stock index jumped 1.2%, almost as much as the Dow’s 1.3% rise. And the Nasdaq composite index of mostly smaller stocks, which began to rally early in August while the Dow languished, jumped 1.1% on Friday and was up 2.8% for the week.
In the bond market, the yield on the Treasury’s key 30-year bond yield dropped to 7.48% from 7.53% on Thursday, ending the week unchanged from last week, despite wild interim swings.
Some Wall Streeters say increasing confidence that the economy has slowed enough to forestall further interest rate increases could bring many sidelined investors into stocks in the weeks ahead.
What’s more, foreign money could be lured to U.S. shares if the dollar continues to strengthen.
On Friday, the dollar made one of its biggest single-day gains of the year against the German mark, bolstered by expectations that the U.S. economy can continue to grow moderately and with low inflation.
In New York, the dollar surged to 1.575 marks, up more than 2% from 1.543 on Thursday.
The dollar also rose to 100.46 Japanese yen, up from 99.71 on Thursday and the highest level since Aug. 8.
Among Friday’s highlights:
* Industrial stocks rocketed anew as investors bet on a more sustainable economic expansion. Alcoa rose 1 3/8 to 81 1/8, GE gained 1 1/8 to 50 3/4, Caterpillar surged 3 5/8 to 115 5/8, FMC added 1 1/8 to 58, Asarco leaped 1 7/8 to 29 7/8 and GM leaped 1 3/8 to 51 3/4.
* Many technology and telecom issues also surged again. Cisco Systems rocketed 1 5/8 to 25 5/8, Sun Microsystems soared 2 7/8 to 28, Nextel jumped 2 1/8 to 30 1/2, IBM added 5/8 to 70 and Hewlett-Packard was up 1 3/8 to 89 1/4.
* Among consumer issues, Procter & Gamble jumped 1 7/8 to 59 3/4, Philip Morris rose 1 3/4 to 58 5/8 and Sears gained 1 to 47 3/4.
Overseas, London’s FTSE-100 index closed sharply higher, adding 30.90 points to 3,265.1. In Frankfurt, the DAX index rose 9.33 points to 2,161.54, and Paris’ CAC index soared 36.22 points to 2,062.74.
Stocks ended steady in Tokyo, with the 225-share Nikkei average rising 28.20 points to 20,471.49.
In Mexico City, the Bolsa index eased 4.04 points to 2,772.17.