U.S. Stocks Rally on Calm Holiday
Investors splurged Friday on beaten-down industrial and technology stocks, giving the Dow Jones industrial average its biggest percentage gain since Sept. 24 and providing needed relief from the market’s recent swoon.
Analysts said one reason for the rally was that investors appeared to accept early reports that Thursday’s deadly shooting at Los Angeles International Airport hadn’t been linked to a wider terrorist attack. Warnings that terrorists might strike over the Fourth of July had cast a pall over the market for several days.
“We pretty much got through the Fourth” without major terrorist attacks, “and that’s part of it,” said A.C. Moore, chief investment strategist for Dunvegan Associates Inc. in Santa Barbara.
“But the market generally is ready for a lift,” said Moore, who believes negative “herd instinct” selling has depressed many stocks to the point where they represent good values.
The major stock indexes, which had rallied in late trading Wednesday, are recovering from a downdraft that had pushed the Standard & Poor’s 500 briefly below its post-Sept. 11 low point, sending the tech-laden Nasdaq composite to a five-year low.
Analysts cautioned against reading too much into Friday’s bullish trading, noting that it came during a holiday-shortened session during which many investors were on the sideline.
“It can easily be wiped out Monday, because you had this light trading day,” said Rich Weiss, chief investment officer at City National Investments in Beverly Hills.
The Dow Jones industrial average surged 324.53 points, or 3.6%, to 9,379.50, as 28 of its 30 members rose. Microsoft, which added $2.41 to 54.88, paced the Dow.
The Nasdaq composite index gained 68.21 points, or 4.94%, to 1,448.38, while the broader S&P; 500 index closed up 35.04 points, or 3.67%, at 989.03. It was the biggest one-day advance for the Nasdaq and S&P; 500 since May 8.
More than four stocks rose for every one that fell on the New York Stock Exchange, and advancers outnumbered decliners by nearly 3 to 1 on Nasdaq.
The rally helped the Dow to a 1.5% gain for the shortened trading week, breaking a six-week losing streak. The S&P; 500 and Nasdaq couldn’t completely overcome Monday and Tuesday’s big losses, however, losing 0.1% and 1% for week, respectively.
Wall Street was heartened by two days of solid gains in European markets, which helped buyers shrug off a report showing June’s unemployment rate rose and payroll growth was weaker than expected.
Despite that job report, most economic indicators have been pointing to recovery, Weiss said.
The negative market psychology of late has been “a mirror image of the market we saw in 1998 and 1999,” when optimism about technology and the markets reached its peak, he said.
“Investors may be realizing that earnings will be coming around now, particularly in the manufacturing sector,” Weiss said, adding that “electronics and even computer hardware are looking reasonable
Goldman Sachs helped stoke the buying by upgrading Asian tech stocks, noting demand for personal computers is rising again worldwide.
And semiconductor shares got a boost after a Fortis Bank analyst said the chip-equipment industry has improved in the last six months and is poised for a recovery.
The surge in stock prices pulled money away from bonds. The yield on 10-year Treasury bonds jumped from 4.76% on Wednesday to 4.86% on Friday--the highest yield since June 13. The dollar continued its recent rally against the yen and euro. Commodity markets in New York were closed.
* All 17 members of the Philadelphia semiconductor index climbed as the index had its biggest gain since May 8, adding more than 8%. Micron Technology rose $1.81 to $22.31. LSI Logic gained 81 cents to $8.41 and Advanced Micro Devices rose 91 cents to $9.34. Intel, the world’s biggest semiconductor maker, jumped $1.79 to $19.54.
* Manufacturing stocks were strong, with the S&P; 500 industrials index adding 4.4%. Among the leaders: General Electric, up $1.79 to $29.69; United Technologies, up $4.27 to $69.10; Tyco International, up 79 cents to $13.45.
* Great Atlantic & Pacific Tea rose $1.65 to $18.05. The operator of the A&P; and Waldbaum’s chains said it revised its results higher for the last three years after discovering accounting “irregularities.”
* JDA Software Group tumbled $12 to $15. The maker of software for retailers reported second-quarter earnings, excluding costs, that were half as much as analysts’ forecasts.
In overseas trading, the main German share index spiked 5.3%; the French index jumped 4.5%; shares in Great Britain rose 3.2%; and the Nikkei index in Japan added 1.8%.
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Reuters was used in compiling this report.
