Burst of Buying Lifts Blue Chips
A wave of buying in the final hour of trading Wednesday lifted blue-chip indexes, giving the Standard & Poor’s 500 its longest winning streak since December.
Meanwhile, Treasury bond yields tumbled as fresh data on the economy suggest the pace of the recovery is slowing.
The broader market was mixed, but many analysts said the day’s action gave more weight to the argument that stocks have stabilized after the devastating decline of the last 10 weeks.
The Dow Jones industrials closed with a gain of 56.56 points, or 0.7%, at 8,736.59, rebounding from a drop of as much as 143 points.
The S&P; 500 added 8.84 points, or 1%, to 911.62, its fourth straight gain. The index hasn’t risen for four consecutive sessions since mid-December.
The Nasdaq composite rallied from its lows in the final hour but still closed with a loss, off 15.93 points, or 1.2%, at 1,328.26.
The government said gross domestic product grew at a 1.1% real annualized rate in the second quarter, well below expectations.
Analysts were encouraged by the market’s relatively calm reaction to the economic news. “The tone of the market is improving,” said Stephen Massocca, president of Pacific Growth Equities. “The economy has slowed down, but I think people know we’re not going back into recession.”
Winners topped losers by 17 to 16 on the New York Stock Exchange, though losers had a 20-to-14 edge on Nasdaq.
The Dow, which plummeted 2,651 points, or 26%, between May 17 and July 23, has risen 1,034 points, or 13.4%, in the last six sessions, as concerns over corporate financial scandals have abated, at least for now.
Some traders said the burst of buying late Wednesday may have been the work of institutional investors rebalancing their portfolios on the last day of the month.
But if institutions were selling bonds to buy stocks, it didn’t hurt Treasury securities: Yields fell on the economic news.
The yield on the 10-year T-note sank to 4.46% from 4.59% on Tuesday, even as the government confirmed it will sell $40 billion in new notes next week to help fund the rising federal deficit.
The two-year T-note yield plunged to 2.23% from 2.42%.
Some analysts said the GDP report raised anew the possibility of the Federal Reserve cutting its benchmark short-term rate, already at a 40-year low of 1.75%.
In currency trading the dollar fell against the yen but rallied against the euro.
Among the day’s highlights:
* The Dow was led higher by American Express, up $1.34 to $35.26; Johnson & Johnson, up $2.06 to $53; and Exxon Mobil, up $1.09 to $36.76.
* Food and beverage stocks attracted buyers. Coca-Cola gained $1.79 to $49.94, Anheuser-Busch jumped $3.10 to $51.71 and Yum Brands rose $1.33 to $30.90.
* Brokerage stocks weakened. UBS fell $1.44 to $44.30, Merrill Lynch lost 69 cents to $35.65 and Lehman Bros. slid 98 cents to $56.71.
Also, Charles Schwab fell 38 cents to $8.95 after Standard & Poor’s cut Schwab’s long-term debt rating to A-minus from A, citing a “tough operating environment.”
* Among technology firms, IBM lost $1.39 to $70.40, Micron Technology dropped $1.49 to $19.49 and Cisco Systems eased 15 cents to $13.19.
* Many investors continued to favor high-dividend stocks. Among utilities, Consolidated Edison rose 75 cents to $42.85 and Southern Co. gained 52 cents to $28.78. Among real estate investment trusts, Weingarten Realty rose $1.18 to $37.10 and Arden Realty was up 43 cents to $25.98.
* Brazil’s beleaguered currency, the real, fell to another record low, closing at 3.46 per dollar on rising concerns the nation may default on its huge debt.
But Brazil’s main share index jumped 4.5% to 9,762.59 as investors snapped up stocks of exporters that should benefit as the weaker currency makes their products cheaper for foreign buyers.
Market Roundup, C5-6
