Late Rally Buoys Stocks
A late surge of buying lifted blue-chip shares to a second straight winning session Thursday, despite more disappointing economic news and profit taking following the market’s big rally the day before. The Dow Jones industrials had their highest close in more than five weeks.
The gains came gradually, however, and solidified only in the final hour of trading. Analysts said investors, still wary after two years of bear markets, remained hesitant about making many big moves.
The Dow closed up 74.83 points, or 0.9%, at 8,818.14 for a two-day advance of 335.75 points. It was the average’s highest close since July 9, when the Dow stood at 9,096.09.
Broader stock indicators also rose. The Standard & Poor’s 500 index advanced 10.63 points, or 1.2%, to 930.25, while the Nasdaq composite index gained 10.71 points, or 0.8%, to 1,345.01.
Winners led losers by more than 3 to 2 on the New York Stock Exchange, but were about even on Nasdaq. Trading was moderate.
The advance came a day after a sizable rally on news that most of the nation’s largest companies had complied with the Securities and Exchange Commission deadline to certify their financial statements.
Investors appeared reassured by the relative ease of the process, but analysts were hesitant to ascribe too much to the market’s two-day winning streak. They said that although investor sentiment has improved from a few months ago, when it seemed as if there was a new corporate scandal every day, market conditions remain fragile.
“There is still a very reasonable negative case to be made against equities starting with valuation, continuing on to the risk of a prolonged period of economic softness and the risk that we may even be heading into a deflationary period of time that’s typically corrosive to profits,” said Charles G. Crane, strategist for Victory SBSF Capital Management.
Indeed, the Labor Department reported Thursday that new claims for jobless benefits rose more than expected last week, and a Federal Reserve study found that the nation’s industrial sector lagged in July. A separate regional survey from the Philadelphia Federal Reserve showed a drop-off in spending and manufacturing activity.
“There’s little doubt there is economic weakness,” said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. “The only unknown is if this is going to turn into a double-dip recession.”
The anemic economic reports encouraged currency traders to push the dollar lower against the euro and the Japanese yen.
Among the day’s highlights:
* Yields on Treasury securities rose on speculation the rally that sent five-and 10-year yields to four-decade lows this week has run its course. The yield on the benchmark 10-year note rose to 4.18% from 4.12% on Wednesday. “It’s tough to find a buyer of bonds at these levels,” Gary Pzegeo, fixed-income manager at Gannett Welsh & Kotler, told Bloomberg News.
* Oil rose 91 cents to $29.06 a barrel in New York trading--its first close above $29 in three months. Oil company shares climbed, with Exxon Mobil gaining 75 cents to $37.14 and ChevronTexaco adding 45 cents to $77.85.
* Among retailers, Target advanced $2.93 to $35.10 on a 27% increase in second-quarter earnings, and Nordstrom surged $2.18 to $20.62 on better-than-expected quarterly results.
* AOL Time Warner advanced 81 cents to $11.86 despite announcing late Wednesday that there may be accounting problems at its America Online unit.
* Overseas markets rallied strongly on the heels of Wall Street’s big advance on Wednesday. Japan’s Nikkei stock index rose 1.6% while key share indexes rose 2.1% in Germany, 3.8% in Britain and 4.1% in France.
Market Roundup, C5-6
