Positive Reports Help the Dow to Extend Its Rally
A slew of unexpectedly strong economic data boosted blue-chip stocks Thursday as investors hoped a better outlook for corporate profits would follow. But technology stocks took a breather after rallying Wednesday.
“For the first time in what seems like months, we’ve gotten some positive economic data,” said Dan McMahon, head of block trading for CIBC World Markets. “It’s giving people more confidence we have reached bottom in the economy and we might start to turn around.”
The Dow Jones industrial average gained 155.30 points, or 2%, to 7,997.12. It was the second straight triple-digit gain for the Dow, which hit a four-year low Tuesday. The widely watched index crossed the 8,000-mark during the day but couldn’t close above it. The broad Standard & Poor’s 500 index climbed 15.29 points, or 1.8%, to 854.95.
The tech-laden Nasdaq composite index eased less than a point, or 0.1%, to 1,221.61, after dropping to a six-year low earlier in the week. It surged 3.4% on Wednesday.
Although the Nasdaq closed slightly lower, winners outnumbered losers on the market by a 6-5 margin. On the New York Stock Exchange, three stocks rose for every one that fell. Trading was active.
Investors welcomed the two-day rally after fears about a possible U.S. war on Iraq and the fragile economic recovery drove the market lower for four straight weeks. According to reports Thursday, orders for durable goods dipped in August, but the drop was smaller than expected; new jobless claims declined for the second straight week; and sales of new U.S. homes rose to a record level in August.
Yet apprehension about armed conflict with Iraq persists, analysts said.
Bond yields, meanwhile, ended little changed after initially jumping on the positive economic news. The yield on the benchmark 10-year Treasury note rose as high as 3.83% but closed at 3.77%, up from Wednesday’s close of 3.75%. Bond yields surged Wednesday as investors fled yields that are at 40-year lows and hunted for bargains among beaten-down stocks.
“As we approach the end of the month, which has been one of the worst in recent memory, investors and institutions are beginning to rotate funds into sectors they believe may do better over the next few quarters,” said Alan Ackerman, chief market strategist at Fahnestock & Co.
The Dow average has fallen 7.7% this month, on track for its worst monthly performance since September 2001. The average has fallen for six straight months.
Monday is the last day of the third quarter, which could bring swings in the market as money managers dress up their portfolios by dropping the quarter’s losers and adding winners. This quarter, the Dow has declined 13.5%, the S&P; 500 has dropped 13.6% and Nasdaq has fallen 16.5%.
In other highlights Thursday:
* Nokia, the world’s largest mobile phone maker, rallied 56 cents to $13.81 on the company’s forecast of rising mobile phone shipments next year. Some computer chip stocks, however, were pummeled after Salomon Smith Barney cut earnings estimates on several communications chip makers, including Broadcom, PMC-Sierra and Applied Micro Circuits. Broadcom slumped $2.04 to $11.86, PMC-Sierra dropped 3 cents to $4.14 and Applied Micro fell 32 cents to $3.17.
* Gold stocks were among the worst performers in the S&P; 500 index after Barrick Gold, one of the world’s biggest gold producers, lowered its 2002 and third-quarter earnings forecasts, blaming lower gold production and higher costs. It slumped $1.87, or 11%, to $15.90. Gold prices fell for a second day, dipping $1.90 to $320.30 in New York trading.
* General Motors jumped almost 5%, helping to boost the Dow, after GM Europe chief Mike Burns said in an interview with Reuters that GM’s European unit is on track to break even in 2003 as new products and cost cutting boost profit. GM gained $1.95 to $41.52.
* Oil stocks also gave the market a lift as crude oil prices clung near 19-month highs, above $30 a barrel. Exxon Mobil rose $1.54 to $34.15 and oil-services giant Schlumberger gained $2.21 to $41.
* European markets were generally higher. Key indexes rose 4.2% in Britain, 6.3% in France, 3.2% in Italy and 2% in Germany.
* Cendant sank 50 cents to $10.75 after the company said it will write down the value of its mortgage servicing assets due to a refinancing surge.
Market Roundup, C6-7
