Stocks Surge on Further Signs of Economic Health
Stocks rallied again Wednesday as new reports pointed to an economic rebound.
The Treasury bond market also smelled recovery: Long-term yields continued to rise to their highest levels in more than a month.
After mild profit-taking Tuesday, buyers flocked to blue-chip shares early in Wednesday’s session, and the rally spread to the Nasdaq market by afternoon.
The Dow industrials closed with a gain of 140.88 points, or 1.4%, to 10,574.29. That recouped nearly all of Tuesday’s 153-point loss.
The Nasdaq composite rose 24.11 points, or 1.3%, to 1,890.40. The Standard & Poor’s 500, up 16.63 points, or 1.5%, ended at a two-month high of 1,162.77.
“The recession is pretty much behind us, so the market is seeking out companies with good prospects for the next year or two,” said Howard Kornblue, managing director of value funds for ING Funds.
The market staged strong advances Friday and Monday on the heels of surprisingly robust economic data. On Wednesday a new government report showed that factory orders surged 1.6% in January.
Also, the Federal Reserve issued a regional economic report that painted a brighter picture. That report, released at 2 p.m. EST, helped stoke the market in the final two hours of trading.
With the Dow up 4.6% since Feb. 28 and Nasdaq up 9.2%, the market has broken out of the funk that kept prices depressed in January and February. Many investors had been sellers, or sidelined, on fears that the Enron Corp. debacle would be followed by widespread corporate accounting scandals.
But mounting signs of economic recovery now are demanding investors’ focus, analysts say.
On Wednesday, winners topped losers by 23 to 9 on the New York Stock Exchange and by 22 to 13 on Nasdaq. Trading was active.
A new bull market for stocks has begun, according to a report from Ned Davis Research Inc., a Venice, Fla., research firm. The Dow has gained nearly 29% in the more than 155 days from its Sept. 21 low, meeting the firm’s criteria for a bull market.
Still, the index’s advance during that stretch is the fourth-weakest of the 33 bull markets on record, Ned Davis said.
“If substantial improvement does occur in expected and actual [corporate] earnings, the market’s upside potential will rise accordingly,” strategist Tim Hayes said in the report. “For now, the odds favor a shallow bull market.”
Indeed, the outlook for corporate earnings is the major issue hanging over the market. Many analysts question how strong the recovery in earnings will be this year and in 2003. Because many stocks already are high-priced relative to estimated 2002 earnings per share, investors may need to believe that those estimates are too low in order to justify bidding stocks substantially higher, some say.
“It doesn’t appear to us that the market’s overly cheap” based on current earnings estimates, said Chris Conkey, chief investment officer for equities at Evergreen Investment Management Co.
In the bond market, investors pushed up long-term Treasury yields to the highest levels in more than a month, as expectations of an economic revival raise fears of higher inflation and greater demand for credit.
The 10-year Treasury note ended at 5.05%, up from 5% on Tuesday and the highest since Jan. 28. The 30-year T-bond yield rose to 5.55% from 5.50% and is the highest since Jan. 2.
Robert McTeer, president of the Dallas Federal Reserve Bank, said Wednesday there would be pressure on the Fed to raise short-term rates before statistics showed quickening inflation. The Fed cut short rates to 40-year lows last year.
In commodity trading, near-term crude oil futures slipped 2 cents to $23.15 a barrel after rising sharply in recent sessions, on expectations that supplies will remain limited this year.
Among Wednesday’s highlights:
* Industrial shares were strong, including Alcoa, up $1.01 to $39.44; Phelps Dodge, up $2.34 to $40.86; and Deere, up 94 cents to $48.97.
* Bank stocks gained on optimism that a stronger economy will mean more lending and lower credit losses. Bank of America rose $1.65 to $66.70, J.P. Morgan Chase jumped $1.54 to $34.05, and Northern Trust was up $1.50 to $59.15.
The Nasdaq financial stocks index hit a record high.
* Biotech stocks soared after ImClone Systems and Bristol-Myers struck a new marketing deal for ImClone’s experimental anti-cancer drug. ImClone surged $4.81 to $28.63; Bristol rose $1.79 to $50.22.
Among other biotech issues, Amgen gained $1.65 to $60.59 and Cephalon leaped $3.34 to $63.50.
* Battered wireless telecom stocks rebounded after Sprint PCS said it would meet this year’s profit and subscriber forecasts. Sprint jumped $1.92 to $11.47, Nextel Communications rose 80 cents to $6.28, and AT&T; Wireless was up 74 cents to $9.27.
* Airline stocks attracted buyers on expectations that travel would pick up with the economy. Delta rose $1.26 to $36.91 and Alaska Air surged $1.75 to $33.25.
* Electricity generator Calpine rebounded $1.72 to $10.87 as investors bet the company will soon line up needed new credit.
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Market Roundup, C8-9
