Dow Jones Hits Highest Level in 4 1/2 Months
A last-minute buying spree Thursday sent the Dow Jones industrial average to its highest level since mid-September as investors, anxious about the economy’s health, scooped up mostly “old-economy” stocks.
But their commitment was questionable, with the gains coming at the end of a lower-volume trading session during which blue-chip and technology issues seesawed. Analysts said Wall Street remains worried about corporate profits amid increasing evidence--including a manufacturing report Thursday--that suggests the economy is headed into recession.
The Dow closed up 96.27 points, or 0.9%, at 10,983.63, its highest close since Sept. 14. The Nasdaq composite index rose a more modest 10.06 points, or 0.4%, to 2,782.79 and the broader Standard & Poor’s 500 index was up 7.46 points, or 0.6%, to 1,373.47.
Analysts said the market appeared to be taking bets that the Federal Reserve will cut interest rates again, possibly in February, to curb the economic slowdown. The Fed lowered rates Wednesday for the second time in a month.
“You have money on the sidelines and you have the Fed very aggressively easing interest rates with the prospect of more cuts in the future. If you’re a portfolio manager you’ve just got to buy,” said Charles Pradilla, chief investment strategist at SG Cowen Securities.
Earnings reports from a handful of non-technology companies got a mixed reception, despite results generally in line with expectations.
Quaker Oats slipped 1 cent to $94.99 after its earnings met forecasts. Investors rewarded Mattel, which rose 71 cents to $15.57 after its results beat estimates.
Analysts said Thursday’s trading reflected investors’ concerns about the economy and corporate profits in the months ahead.
“I think investors are worried. A lot of them lost a lot of money in 2000 and are going to need more convincing to get back into the market,” said Barry Hyman, chief investment strategist at Weatherly Securities.
Among tech stocks, IBM notched a $2.05 gain to $114.05 and Microsoft rose $1.31 to $62.38, while Web portal Yahoo dropped $1.25 to $36.06 and AOL Time Warner fell $2.73 to $49.83.
Old-economy stocks fared better, boosted by gains in Alcoa, up $1.26 at $38 on news of more cost-cutting, and consumer goods manufacturer Procter & Gamble, which rose $2.11 to $73.95. Also, SBC Communications surged $2.20 to $50.55 after the company said it is raising prices on its high-speed Internet service.
In a report Thursday, the National Assn. of Purchasing Management said manufacturing activity in January slumped to its lowest level since March 1991. That added to concerns prompted by a government report Wednesday showing economic growth in the fourth quarter at its weakest level in five years.
The bond market rallied on the news. The yield on the benchmark 10-year Treasury note fell to 5.09% from 5.12% on Wednesday as traders bet on further Fed rate cuts to stimulate the economy.
On the Nymex, meanwhile, oil prices surged $1.16 to $29.82 a barrel as production cutbacks previously agreed to by the Organization of Petroleum Exporting Countries went into effect.
Advancing issues outnumbered decliners 8 to 7 on the New York Stock Exchange. Losers outpaced winners 10 to 9 on Nasdaq. Trading was light on both markets.
Market Roundup: C6, C7
