Optimism About Recovery Buoys Foreign Markets
The U.S. stock market’s advance Wednesday was broad and deep, and was powered by a surge in trading volume.
Most foreign stock markets also were up sharply.
But Treasury bond yields jumped anew, as fixed-income investors worried that better-than-expected economic data may mean the end of Federal Reserve interest rate cuts.
On Wall Street, winners topped losers by about 2 to 1 on the New York Stock Exchange and on Nasdaq, and Nasdaq volume reached a very heavy 2.7 billion shares.
The Nasdaq composite index’s gain of 83.74 points, or 4.3%, to 2,046.84, was the strongest among major U.S. indexes, but every major index closed higher.
The Dow industrials rose 220.45 points, or 2.2%, to 10,114.29.
The Standard & Poor’s index of 600 smaller stocks gained 2.6%, beating the blue-chip S&P; 500, which rose 2.2%.
Investors’ enthusiasm mounted through the day, and the market ended near the session’s highest levels as investors continued to pour in, afraid of missing out on an extended rally.
“It’s like, ‘We have got to go in now,”’ said Richard A. Dickson, technical analyst for Hilliard Lyons in Louisville, Ky. “You are getting momentum going. And momentum begets momentum.”
A rally in European markets got a boost late in the session as Wall Street opened.
By the close, the German DAX index was up nearly 5%, the Spanish market gained 3.7% and the Italian market added 3.7%.
In Asia before U.S. markets opened Japan’s Nikkei-225 index rose 2.5%, and the rally continued as trading opened today.
Worldwide, more investors are betting on an economic recovery in 2002, analysts said. In times of economic growth, stocks are the favored investment.
Indeed, some investors cashed out of Treasury bonds Wednesday to buy stocks, analysts said. That drove Treasury yields higher across the board.
The 10-year T-note yield jumped to 4.89% from 4.66% Tuesday. The 2-year T-note rose to 3.06% from 2.79%.
Stronger-than-expected economic data in recent weeks might be enough to give the Federal Reserve pause in its campaign to ease credit, some analysts said.
Fed policymakers meet Tuesday, and they had been expected to cut their benchmark short-term rate from 2% to as low as 1.5%.
The economic reports “will get talk started that the Fed will cut 25 basis points [one quarter point] and then that’s it,” John Santoro, head of government bond trading at SG Cowen Securities, told Bloomberg News.
Among Wednesday’s highlights:
* In the tech sector, IBM jumped $4.76 to $121.40, Intel gained $1.75 to $34.61, Texas Instruments surged $2.50 to $33.50 and PeopleSoft rocketed $3.91 to $40.60.
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* Retail stocks rallied on optimism about consumer spending. Target soared $2.26 to $39.62 and Toys R Us gained $2.05 to $22.40.
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* Home builders’ shares zoomed after major builders said November orders were strong, and Centex raised its earnings per share estimate for the fiscal year ending in March 2002 to $5.85, compared with analysts’ consensus estimate of $5.76. The company predicted continued growth over the next two years.
Centex jumped $3.66 to $50.67. Among other builders, KB Home gained $2.43 to $36.60 after saying November orders rose 14%. Ryland jumped $2.80 to $66.70.
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* Financial stocks were mostly higher, led by brokerages. Goldman Sachs rocketed $5.23 to $92.40.
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* Some investors sold drug and defense stocks. Those sectors had fared well when fear of a deeper recession had been high. Merck fell $1.04 to $66.24 and Lockheed Martin lost 90 cents to $45.99.
