Stocks Advance on Upbeat Retail Data
An encouraging report on retail sales inspired another rally on Wall Street on Wednesday as investors grew more confident about an impending economic recovery. The Dow Jones industrial average scored its best close in more than a month and its third triple-digit gain in four sessions.
But analysts still cautioned against too much optimism, noting that investor sentiment remains fragile. Despite short-lived rallies, stocks have moved mostly lower in recent weeks on concerns that prices are too high given the uncertain prognosis for earnings.
The Dow was less than 11 points from regaining the 10,000 level after closing up 125.93 points, or 1.3%, at 9,989.67--its best close since Jan. 10. The Dow rose 118 points Friday and 140 on Monday.
Broader stock indicators also advanced. The Standard & Poor’s 500 index climbed 11.01 points, or 1.0%, to 1,118.51, while the Nasdaq composite index gained 24.95 points, or 1.4%, to 1,859.16.
Winners outpaced losers by 2 to 1 on the New York Stock Exchange and by 4 to 3 on Nasdaq. Volume was weak, continuing a trend of lackluster trading activity.
Investors were encouraged by a Commerce Department report showing retail sales rose by a satisfactory 1.2% in January, excluding volatile automobile sales. It was the biggest gain since March 2000--the month Nasdaq and the S&P; 500 hit their all-time highs.
Auto sales fell by 4.3%, but that decline was anticipated as no-interest financing and other sales incentives expired.
Consumer spending is closely watched because it accounts for two-thirds of the economy.
“The number was much stronger than expected and it’s giving people a little bit of optimism that the economy is recovering better than thought,” said Todd Clark, head of listed equity trading at Wells Fargo Securities.
The news helped boost retail stocks. Home Depot advanced 93 cents to $51.24. Rival Lowe’s gained 63 cents to $46.16. Office Depot rose $2.30 to $18.49 after raising its earnings outlook.
Technology stocks also fared well, helped by a better-than-expected report from Applied Materials. The chip-making equipment company rose $3.25 to $47.96 after announcing a $45-million first-quarter loss Tuesday that beat expectations. The company also said it expects orders in the current quarter to grow 10% to 15%.
The buying also spread to manufacturing and industrial stocks. General Motors rose $2.13 to $51.20, while Boeing gained $1.75 to $44.90. Both are Dow members.
Wall Street remains vulnerable to fears of more terrorist attacks. Stocks pulled back briefly in the morning after a terminal at Los Angeles International Airport was evacuated because of a mysterious package. The package was later determined not to be dangerous.
In other market highlights:
* The retail sales report heightened speculation the Federal Reserve will raise interest rates by midyear as the economy recovers. That drove some investors away from Treasury securities. The yield on the benchmark 10-year Treasury note rose to 4.99% from 4.98% on Tuesday.
* Shares of GameStop, the video game retailing subsidiary of Barnes & Noble, closed at $20.10 in their first day of trading. They opened at $19.25--higher than the $18 offer price set a day earlier.
* American International Group gained $3.11 to $77.08 after McDonald Investments reiterated its “aggressive buy” rating on the stock. Other insurers also rose: XL Capital rose $5.86 to $97.11, RenaissanceRe added $6.75 to $108.80 and Ace rose $3.84 to $44, despite reporting a 59% drop in profit. The Bloomberg index of insurers rose 3.3%.
* Telecom shares remained weak. WorldCom lost 10 cents to $7.16, Qwest Communications fell 62 cents to $8.59, Sprint PCS was off 37 cents to $11.62 and Nortel Networks lost 31 cents to $6.11.
Market Roundup, C8-9
