Stocks Rise Again on Renewed Optimism
Investors maintained their enthusiasm over lower interest rates Thursday, extending the previous day’s big rally on Wall Street.
A small increase in the index of leading economic indicators helped the stock market widen its large advance of Wednesday, when investors snapped up shares in response to the Federal Reserve’s decision Tuesday to lower interest rates by a half-point.
The Dow Jones industrial average closed up 32.66 points, or 0.3%, at 11,248.58. The moderate gain followed Wednesday’s 342-point climb, when the blue-chip average closed above 11,000 for the first time since Sept. 14.
The broader market also ended higher. The Nasdaq composite index advanced 27.24 points, or 1.3%, to 2,193.68, and the Standard & Poor’s 500 index moved up 3.50, or 0.3%, to 1,288.49.
Gainers led losers 19 to 12 on the New York Stock Exchange and 24 to 15 on Nasdaq in active trading.
After five Fed rate cuts this year, investors are increasingly hopeful that the economy and corporate earnings will turn around in the second half of 2001.
“The good news is the consumer, and ultimately business investors, are going to be in the mood to spend and invest money,” said Kevin Caron, associate market strategist at Gruntal & Co.
The gain in the Conference Board’s index of leading economic indicators Thursday raised Wall Street’s optimism that the economy is starting to recover. The index, an important gauge of future economic activity, rose 0.1% in April after two consecutive monthly declines.
Among Thursday’s winners were companies that surpassed or met earnings expectations, standouts in what has been a disappointing earnings season. Kmart advanced 45 cents to $10.58 after announcing a loss of 2 cents a share for the first quarter, 5 cents narrower than Wall Street expected.
Hewlett-Packard, a Dow Jones industrial average component that modestly beat earnings forecasts Wednesday, rose sharply, up $4.16, or 16%, to $30.90.
Dell Computer gained 50 cents to close at $25.88. After the market closed, Dell said its quarterly earnings fell slightly but met estimates. The company’s stock fell $1.03 in after-hours trading.
Investors also bid higher some major industrial shares, which stand to benefit as the economy strengthens, including Boeing, up $2.04 to $68.79; International Paper, up $1 to $40.85; and steelmaker Nucor, up $1.20 to $53.70.
Another sign of investors’ resurgent optimism could be seen in what issues they sold Thursday, including stocks in so-called defensive sectors, such as consumer products. Procter & Gamble fell $1.14 to $67.15.
Analysts are confident the market will be able to hang onto much of its gains because the economy and earnings appear to be through the worst--a departure from the rate-cut rallies earlier this year that faded as worries about the future set back in.
“Once the market gets to this point when it starts to smell recovery, you can indeed have very good rallies,” Caron said.
Among Thursday’s highlights:
* The initial public offering of optical networking company Tellium was well-received. The 9-million-share offering, priced at $15 a share, opened at $21.81 and hit a high of $23.15 before closing at $20.93. The ticker symbol is TELM.
Also, the Instinet electronic stock market priced its IPO at $14.50 a share. The stock will begin trading today on Nasdaq under the ticker symbol INET.
* The bond market was mixed. The yield on the two-year Treasury note rose to 4.32% from 4.23% on Wednesday, while the yield on the 10-year Treasury note fell to 5.40% from 5.46%.
Two-year-note yields this week pushed above the Fed’s key short-term rate, now at 4%, for the first time since June 2000--a sign the market is betting the Fed will soon wrap up rate cuts, some analysts say.
* Gold rose again, up $1.60 to $274 an ounce in New York futures trading, as some investors continued to worry about inflation. Gold has risen more than 7% since early April.
