Strong Profit Reports Fuel Broad Stock Rally : Markets: The Dow average sets another new record, climbing 39.43 points. But the dollar’s two-day rally fizzles as pessimism returns.
The U.S. stock market proved again Friday that it respects no ceilings, as the Dow Jones industrial average shot up 39.43 points to a record 4,270.09--bringing its year-to-date gain to a stunning 11.4%.
The broad market also advanced, in what analysts said was a buying surge sparked in part by strong first-quarter corporate earnings reports.
“There’s just been a lot of positive surprises and the market seems to be responding to the good surprises,” said John Church, chief investment officer at Glenmede Trust.
Technical factors also helped drive share prices, however, as traders covered certain bets related to the monthly expiration of stock option contracts. Option-related trading helped boost New York Stock Exchange volume to 406 million shares, heaviest since mid-March.
Stocks rose despite a new setback for the pummeled dollar, which had rallied at mid-week on hopes that major industrial nations would fashion a dollar-rescue plan when finance ministers meet next week.
As expectations faded for something substantial from that meeting, the dollar closed in New York at 82.70 Japanese yen, down from 83.11 Thursday, and at 1.369 German marks, down from 1.384.
The mark benefited from buying in Europe, where traders sought safe-haven ahead of Sunday’s political elections in France and Italy.
Wall Street, however, paid as little attention Friday to the dollar’s problems as it has all year, as the bond market remained calm and stocks advanced for their own particular reasons.
Rising issues outnumbered losers by 1,311 to 846 on the NYSE, and many broad indexes closed just below their all-time highs. The Standard & Poor’s 500 index, for example, rose 3.20 points to 508.49, near the record 509.23 set April 13.
In the Nasdaq market of mostly smaller stocks, the composite index gained 4.43 points to 823.44, continuing to revive from a bout of profit taking earlier in the week.
Analysts say that the powerful bull market in stocks reflects many investors’ belief that the U.S. economy is slowing to a sustainable, low-inflation growth pace that will allow interest rates to remain stable or fall further.
What’s more, in the face of an economy that unquestionably lost steam in the first quarter--based on a slew of government data--the strength of corporate earnings has been unexpected good news.
“You would think weak data would mean weaker earnings and stock prices,” said Joseph McAlinden, chief market strategist at Dillon Read & Co.
Instead, better-than-expected earnings from diverse blue-chip companies like IBM, Coca-Cola, Intel and oil-services firm Schlumberger have convinced many investors that lean U.S. businesses can thrive even in a slower economy.
Among Friday’s highlights:
* IBM continued to rocket after Thurday’s record first-quarter earnings report. The stock surged 2 5/8 to 91 5/8. Other mainframe computer-related stocks rising in sympathy included software firm Computer Associates, up 4 5/8 to 60 1/2; Digital Equipment, up 3 1/4 to 45; and BMC Software, up 2 1/8 to 60 1/2.
* Cereal giant Kellogg shot up 2 3/8 to 63 3/4 after its earnings beat estimates. Other food stocks moving higher included CPC International, up 7/8 to 59 7/8; General Mills, up 3/4 to 60 3/4; PepsiCo, up 7/8 to 41 1/4, and Heinz, up 3/4 to 42 7/8.
* Some airline stocks rallied after Southwest Airlines reported earnings and suggested the worst is over in the fare-ware battle. Southwest leaped 2 5/8 to 21 1/2, United Airlines parent UAL gained 1 5/8 to 110 7/8 and American Airlines parent AMR added 3/4 to 64 3/4.
* Many energy stocks added to recent gains as crude oil prices rose further, helped by seasonal demand. June oil futures rose 22 cents to $20.41 a barrel on the New York Merc. Stock winners included Valero Energy, up 2 1/8 to 20 3/8; Sun Co., up 2 to 30 1/8, and Ashland Oil, up 1 5/8 to 37 7/8.
* Investors chased some defense and industrial issues, many of which have lagged in this year’s market rally. United Technologies rocketed 1 5/8 to 72 3/4, Eaton jumped 1 3/4 to 58, Acme Cleveland soared 2 1/4 to 20 3/8 and Timken gained 1 1/8 to 39 1/2.
In foreign markets, London’s FTSE-100 index jumped 25.2 points to 3,199.9 while Tokyo’s 225-share Nikkei average rebounded 325.18 points to 16,968.24.
In Mexico City, stock prices rallied briskly on optimism over a stronger peso and expectations that Telmex’s quarterly earnings will be better than expected. The Bolsa index shot up 88.90 points, or 4.9%, to 1,919.42.
In U.S. commodities trading, action focused on cotton, as prices surged to new highs because of strong demand and dwindling world supplies.
