Positive Economic Data Help Stocks Post Thin Gains

Positive economic news helped stocks post slim gains Friday despite a wave of year-end tax-related selling.

The Dow Jones industrial average rose 5.68 points, or 0.1%, to 10,136.99, its highest close since Aug. 28. The broader market also finished higher. The tech-focused Nasdaq composite index rose 10.84 points, or 0.6%, to 1,987.26; the Standard & Poor’s 500 index advanced 3.89 points, or 0.3%, to 1,161.02.

Winners led losers by nearly 2 to 1 on the New York Stock Exchange and by a narrower 5-to-4 margin on Nasdaq. Volume was light, with many traders off for the holidays.

Friday’s gains topped a positive, holiday-shortened week for the major averages.

The Dow was up 1% for the week, the S&P; 500 gained 1.4% and the Nasdaq rose 2.1%, snapping a two-week losing streak.

The market got a boost when the Conference Board reported its consumer confidence index surged to 93.7 from 84.9 in November.

Meanwhile, sales of new homes soared 6.4% last month, the largest increase in nearly a year, according to the Commerce Department.

Investors also were heartened by a report on durable-goods orders. Although orders to U.S. factors fell 4.8% in November due mostly to a big drop in demand for military airplanes, demand rose for many other big-ticket items, including computers, cars and industrial machinery.

“To me, the market’s responding to the fundamentals,” said Jeffrey Applegate, chief investment strategist at Lehman Bros. “There’s been some positive earnings news, some positive guidance, and today you had a nice jump in consumer confidence. That’s all good for stocks.”

Though the market’s mood was upbeat, some investors sold stocks to take tax losses for 2001, a yearly occurrence and particularly predictable in years when the market falls.

“You are down to the crunch time of those who are left to take some tax losses. It makes sense for taxable investors, and when you have had back-to-back down years, you have to expect some year-end tax loss selling,” said Matt Brown, head of equity management at Wilmington Trust.

With one trading day left for the year, the benchmark S&P; 500 is down 12.1% for 2001 and is on track for its first back-to-back losing years since 1973-74.

The Dow is off a milder 6.0% drop year to date and Nasdaq is down 19.6%.

Friday’s gainers were mostly concentrated in the technology sector, which many investors expect will lead the market higher in 2002. Broadcom rose 95 cents to $43, while PMC-Sierra gained 93 cents to $22.78.

Yahoo climbed 53 cents to $18.30 on a fourth-quarter revenue upgrade by Merrill Lynch analyst Henry Blodget. He estimates the Internet media company will post revenue of $175 million, above Wall Street’s forecast of $168 million.

Blue chips were more mixed. American Express rose $1.05 to $36.05, but Procter & Gamble fell 64 cents to $79.51. General Motors gained 95 cents to $48.92, while Coca Cola declined 77 cents to $47.17.

Oil stocks were slightly higher as OPEC confirmed it would cut daily production by about 6% to firm up sagging oil prices. The cuts will begin Jan. 1 and last at least six months.

Conoco rose 13 cents to $28.38, while ChevronTexaco gained 13 cents to close at $90.44.

Another reason for Friday’s gains was the so-called Santa Claus rally, an annual occurrence between Christmas and New Year’s, when stocks move higher as investors grow hopeful about the year ahead and money managers adjust portfolios, picking up stocks that have reached bargain prices.

Overseas, Argentina’s stock market fell 7.1% in its first day of trading since Dec. 20.