Techs Lead Broad Rally; Dollar Rises
Stocks rallied Thursday, posting their biggest gains in two weeks, as bargain hunters provided at least a temporary respite from the market’s slide from record levels.
Bond yields dropped and the dollar rose after the government released reports showing labor costs rising and home sales expanding to another record last month.
The Dow Jones industrial average rose 111.99 points to close at 9,026.95, wiping out losses of the last two days, but still leaving the blue-chip measure 311.02 points from its July 17 record of 9,337.97.
Big-name technology shares led the latest about-face in a week of sudden market turns.
The Nasdaq composite index surged 38.09 points to 1,919.58 as Dell Computer rose $5.38 to close at $112.75, Intel rose $3 to $87.63 and Microsoft rose $2.75 to $113.44.
Advancers fared better on the New York Stock Exchange, outnumbering decliners by nearly a 2-1 margin in heavy trading. The NYSE rose 7.84 to 575.26. The Russell 2,000 index of smaller companies rose 3.31 points to 429.50, and the Standard & Poor’s 500-stock index rose 17.74 points to 1,142.95, erasing a substantial portion of its losses from the last two weeks, a period dominated by uncertainty about the economy and company profits.
End-of-the-month portfolio adjustments in an oversold market that was ripe for a bounce-back also fueled the rally.
“Market deterioration over the past couple of weeks reached an extremely oversold level,” said Scott Bleier, chief investment strategist at Prime Charter Ltd.
“Most corporate earnings are out of the way and we are very oversold,” he said. “That happens to coincide with the end of the month when portfolio managers rejig their investments.”
The Labor Department said its employment cost index rose 0.9% in the second quarter. Economists polled by Reuters had forecast a 0.8% overall increase following a 0.7% increase in the first quarter.
“This is a relief rally that the data didn’t make anybody jump out of their seats,” said Jim Benning, a trader at BT Brokerage. “It was pretty much in line.”
In the bond market, the 30-year Treasury yield fell to 5.72% from 5.76% on Wednesday.
“The response of the bond market is very favorable--it’s telling us it’s not enough to raise rates at the Fed’s meeting in August, but it could have been a better number,” said Paul Rabbitt, chief quantitative analyst at CIBC Oppenheimer & Co.
Investors also welcomed data that showed the economy was still humming, with the sale of new homes in June jumping to a record annual rate of 935,000, up 3.8% from the previous record pace of 901,000 in May.
Stocks were also helped by positive comments from Goldman, Sachs & Co.’s star market analyst, Abby Joseph Cohen. In a report to clients this week she characterized second-quarter earnings as “so far, so good” and forecast that they will pick up next year. With about 80% of S&P; companies reporting, quarterly earnings are up about 3%.
But the market’s strength will be tested today when the government gives its first report on the economy’s second-quarter performance, which is expected to slow markedly from the first quarter’s rapid 5.4% rate of growth.
Among Thursday’s highlights:
* IBM jumped $5.63 to $133.38 as the Dow’s strongest component, and Compaq Computer rose $2.63 to $33.69 as the most active issue on the NYSE.
* Procter & Gamble, the top U.S. maker of consumer products, was the biggest decliner in the Dow average. It dropped $4.50 to $83.63 after warning that earnings in the first half of next year could be hurt by weakness in Asia as well as price competition. It reported a 12% gain in fourth-quarter earnings, matching estimates.
Market Roundup, D6
