Housing Sector Buoys Stocks
The latest round of evidence to support a long-awaited economic recovery--namely a strong jump in November housing construction--sent stocks to their third straight winning session Tuesday.
Better-than-expected earnings from electronics retailers Best Buy and Circuit City Stores also contributed to the market’s advance. Combined with the housing report, the news improved investors’ outlook for the economy, two-thirds of which consists of consumer spending.
“There are a lot of reasons to be optimistic,” said Thomas F. Lydon Jr., president of Global Trends Investments in Newport Beach. Among them, he said, are the 11 interest rate cuts by the Federal Reserve this year and many companies’ improved earnings projections.
The Dow Jones industrial average closed up 106.42 points, or 1.1%, at 9,998.39, adding to Monday’s 81-point gain. The broader market also advanced. The Nasdaq composite index rose 17.31 points, or 0.9%, to 2,004.76. The Standard & Poor’s 500 index gained 8.56 points, or 0.8%, to 1,142.92.
Winners outnumbered losers by 3 to 2 on the New York Stock Exchange and by 4 to 3 on Nasdaq. Trading was moderate.
Investors, who have been looking for evidence of an economic recovery, welcomed the Commerce Department’s report that housing construction rose 8.2% in November. The increase was bigger than analysts were expecting and brought housing starts to their highest level since July as builders bet that low mortgage rates would continue to attract buyers.
Home builders posted healthy gains, led by Lennar, up $2.75 to $44. Lennar said its fourth-quarter earnings will exceed Wall Street’s forecast by 25%.
Best Buy rose $3.55 to $72.55 on fiscal third-quarter earnings that were 40% higher than in the same period last year and beat analyst expectations by a penny a share. Circuit City, which also posted better-than-expected profit, inched up 16 cents to $23.86 after rising as high as $25.22.
Also on the upside, General Electric rose $1.42 to $39.72, having reaffirmed late Monday its fourth-quarter and 2001 earnings expectations.
DuPont advanced $1.10 to $43.22 following an upgrade by Merrill Lynch.
In technology, IBM gained 86 cents to $122.20, while Ciena rose 56 cents to $15.47.
“There are some great companies that are available at great discounts compared to where they were a year ago,” Lydon said.
Analysts said the buying also was attributable to the likelihood that companies will have an easy time in 2002 posting improved profits over this year, which marked the worst profit decline since 1991.
In other market news:
* The yen sank to a three-year low against the dollar for a third straight session as Japan’s finance minister pressured the Bank of Japan to lower interest rates further.
* Oil prices inched up after OPEC producers said they would meet late this month to hammer out an agreement on output cuts. Norway on Monday pledged to support the cartel’s effort to prop up prices. In New York trading, near-term oil futures rose 14 cents to $19.36 a barrel.
* Tempering some investor enthusiasm was Solectron, the world’s largest contract electronics manufacturer, which reported a loss and said sales could drop further. . Solectron was the NYSE’s most actively traded stock, falling $2.71 to $12.10.
* Treasury yields fell. The yield on the benchmark 10-year Treasury note slid to 5.12% from 5.19% Monday, while the six-month T-bill yield dipped to 1.80% from 1.83%.
* Siebel Systems jumped $3.74 to $30.94 after a Banc of America analyst raised the company’s earnings estimates to reflect improvement in the software maker’s business.
