Earnings Optimism Sends Stock Indexes to Record Highs
Stocks sailed to new record highs Friday as continued optimism about corporate profits and strong consumer spending offset the effects of a rocky bond market.
The Dow Jones industrial average rose 66.81 points to close at 11,193.70, topping its previous record close of 11,187.36 on Wednesday. The Dow picked up 54.46 points, or 0.5%, for the week.
The Standard & Poor’s 500 and the Nasdaq composite index also notched records. For the technology-rich Nasdaq, Friday was the sixth record-setting day in seven sessions, as it rallied 21.21 points to close at 2,793.07. The S&P; 500 rose 8.86 points to 1,403.28.
For the week, the Nasdaq gained 1.9% and the S&P; 500 climbed 0.9%.
Dell Computer led technology issues Friday, rising $2.88 to $42.81 after Goldman Sachs raised its rating on the company. Analysts said the positive word from Goldman sparked interest in the technology sector, helping the Nasdaq extend its winning streak.
“There is evidence of sustained growth rates among the computer makers,” said Hugh Johnson, chief investment officer at First Albany Corp. Dow component IBM rose $3.38 to $137.38.
McDonald’s also fueled the Dow’s gain, jumping $3.94 to $44.56. Investment firm Schroder & Co. upgraded the company’s stock, citing strong expectations for the chain’s second-quarter sales.
DuPont rose $3.19 to $71.69 after the company unveiled details of the coming spinoff of its Conoco unit.
Early in the session, stocks fell along with bond prices as credit markets absorbed an $8.6-billion offering by Ford and its credit unit. The offering is the largest corporate bond deal ever, topping AT&T;'s $8-billion sale earlier this year.
Prices evened out as the market digested the impact of the new corporate supply. The yield on the Treasury’s 30-year bond, which had spiked as high as 6.03%, edged back to 6.00%, up from 5.99% the day before.
Advancing issues outnumbered decliners by an 11-7 ratio on the New York Stock Exchange, where volume was light.
Despite Friday’s gains, many traders remained cautious about next week, when the government’s producer and consumer price indexes, which are key measures of inflation, are scheduled to be released.
A flood of second-quarter profit reports also are due. Given the market’s sharp advance the last two weeks, analysts say stocks are unlikely to rise much more unless profits sharply exceed expectations.
“People have already priced strong earnings into the market,” said Peter Anderson, chief investment officer at American Express Financial Advisors.
General Motors could be headed for a plunge Monday, analysts said. A jury ruled late Friday that the company must pay $4.9 billion to six people who were severely burned in an accident. The stock was little changed in the regular session, but in third-market trading immediately after the close it lost $1.63 to $66.13.
The NYSE composite index rose 3.63 points to 657.68, and the Russell 2,000 index of smaller companies rose 3.23 points to 457.98.
Among the highlights:
* Liquid Audio (ticker: LQID) raced $21.56 to $36.56 in its first day of trading. The Redwood City, Calif., company sells music that consumers download from the Internet.
* Electric City soared $10.38 to $28.13 as the maker of products that help people conserve energy approved a 2-for-1 stock split.
* Among companies issuing profit warnings, Jones Lang LaSalle dropped $5.06 to $17 as the largest U.S. manager of commercial properties said it expects earnings “substantially” below analysts’ estimates. Visio plunged $9.38 to $29.56 as the software maker said it expected an earnings shortfall.
Market Roundup, C4