Retail Sales Gains Send Stocks Higher
Stocks rallied Thursday and bond yields registered their biggest one-day rise in a year after retail sales outside the auto sector posted a surprising gain, spurring hopes that U.S. consumers will continue spending and keep driving an economic recovery.
The blue-chip Dow Jones industrial average rose 143.64 points, or 1.7%, to 8,542.13.
The broader Standard & Poor’s 500 index climbed 21.74 points, or 2.5%, to 904.27, while the technology-heavy Nasdaq composite index jumped 50.18 points, or 3.7%, to 1,411.52.
Winners outnumbered losers by more than 2 to 1 on the New York Stock Exchange and on Nasdaq in active trading.
Retail sales excluding autos gained 0.7% in October, their biggest gain in six months and ahead of economists’ forecasts. Consumer spending accounts for about two-thirds of the U.S. economy.
“It’s given new confidence to people that maybe the economy will start turning around at a better pace than was expected,” said James Volk, director of trading at D.A. Davidson & Co.
Retail sales that included auto sales were flat, the Commerce Department said, but better than the decline of 0.2 % forecast by economists.
In other good news for stocks, a Labor Department report showing a second straight week of declines in new applications for jobless benefits offered hopes that the job market may be struggling out of a weak patch.
“People are always nervous about fourth-quarter earnings and Christmas, but so far it doesn’t feel so bad,” said Arnie Owen, managing director of equities at Roth Capital Partners.
“The underlying fundamentals are starting to come into play to take this market higher,” he said.
The economic news sent bond yields soaring. The yield on the benchmark 10-year Treasury note jumped to 4.06% from Wednesday’s close of 3.84%. Fixed-income traders, like many investors, had bet heavily that the economic data would be so weak as to raise the possibility of a double-dip recession and drag yields lower.
Hopes that a possible attack on Iraq could be delayed or avoided also spurred stocks higher after Iraq accepted a U.N. resolution on disarmament Wednesday.
“The Iraq situation has a big effect on stock prices and people’s sentiment as a whole,” said Michael O’Hare, head of block trading at Lehman Bros.
“It has taken some of the fear away from the marketplace.”
Gold, a traditional safe haven, fell 80 cents to $317.90 an ounce in New York, adding to Wednesday’s steep losses. Oil inched up 10 cents a barrel to $25.29.
In other highlights:
* HSBC’s offer to acquire Household International sent other consumer financial stocks higher, as the S&P; consumer financial index rose 8.3%. American Express climbed $1.75 to $36.95, Providian Financial added 51 cents to $4.98, and Capital One Financial rose $1.84 to $30. MBNA added 94 cents to $21.29. U.S.-traded shares of HSBC fell $1.85 to $54.20 while Household climbed $5.04 to $27.50, a 22% gain.
* Intel helped buoy Nasdaq, rising $1.09 to $19.21 after the chip maker said it increased its stock buyback program by 480 million shares. Intel helped spark a nearly 8% rise in the SOX semiconductor index.
* Other winners included No. 3 U.S. retailer Target, which jumped $3.46 or 11.5% to $33.49 after the company reported a 50% rise in quarterly earnings.
* China Telecom shares fell $1.02 to $17.96 in their New York trading debut. Weak demand forced the Beijing-based company to cut by 60% what would have been Asia’s biggest initial public offering this year.
* Honeywell International fell $2.09 to $23.16 after the company said it may contribute up to $900 million to its employee pension plans after assets tumbled this year. The stock, a Dow component, was the fifth-most actively traded issue on the Big Board.
Market Roundup, C7-8
