Economic Data, Falling Yields Lift Markets
Blue-chip stocks jumped to 19-month highs Tuesday as buyers turned aggressive again amid some upbeat economic reports and falling bond yields.
The Dow Jones industrial average rose 106.74 points, or 1.1%, to 10,129.56, its highest level since May 23, 2002.
The S&P; 500 also reached its highest mark since May 2002, gaining 7.09 points, or 0.7%, to 1,075.13.
Technology issues and smaller stocks took a back seat to blue chips, continuing the pattern of recent sessions as big-name stocks play catch-up to lesser-known issues that had led the market for much of this year.
The Nasdaq composite index struggled into positive territory in the last hour of the session and closed up 6.03 points, or 0.3%, at 1,924.29. The Russell 2,000 index of smaller stocks edged up 2.49 points, or 0.5%, to 537.74.
Rising stocks outnumbered losers by about 7 to 5 on the New York Stock Exchange, while losers had a slight edge on Nasdaq.
Heavy-industry stocks paced the Dow’s advance after the Federal Reserve said U.S. industrial production rose 0.9% in November, above expectations. It was the strongest reading since October 1999.
The Fed report “suggests not only is the rate of the increase in production accelerating, but a broader assortment of industries are seeing an improvement, and that tells me the [economy’s] recovery is much more durable than some might have thought,” said Mark Vitner, an economist with Wachovia Corp. in Charlotte, N.C.
Within the Dow, Caterpillar surged $2.50 to $81.02, United Technologies jumped $1.97 to $93.52 and 3M rose 98 cents to $82.98. All were record highs.
Stocks made steady progress through Tuesday’s session, recovering from Monday’s disappointment -- when a rally in the first few minutes, sparked by news Sunday that Saddam Hussein had been captured, quickly fizzled.
Some analysts said the renewed buying might allay fears that the 10,000 level on the Dow would become a ceiling. The Dow crossed 10,000 last week for the first time in 18 months.
“We really have tremendous momentum in the economy and in the financial markets,” Marshall Front, chairman of Front Barnett Associates, told Bloomberg News.
Some investors also were cheered Tuesday after the government said the consumer price index declined in November. The inflation gauge, pulled down by cheaper gasoline, clothing and airfare costs, offered fresh evidence that pricing pressures aren’t increasing despite the economy’s recovery.
Economists said that bolstered the case for the Fed to leave its benchmark interest rate low for some time.
Treasury bond yields fell on the inflation news. The 10-year Treasury note yield dipped to 4.21% from 4.26% on Monday.
The two-year T-note fell to 1.79% from 1.83%. It was as high as 2.10% on Dec. 1.
In other markets, the euro continued to climb to record highs against the dollar, reaching $1.234 in New York.
Gold eased, with near-term futures dropping $1.50 to $407.70 an ounce.
Among Tuesday’s highlights:
* Industrial shares gaining ground included Deere, up $1.49 to $64.01; Whirlpool, up $2.31 to $69.62; and General Motors, up 67 cents to $49.60.
Also, General Electric added 32 cents to $30.65. Chief Executive Jeffrey Immelt reiterated at a meeting with investors that the company would earn at least 45 cents a share this quarter.
* Some commodity-related shares that have been hot lately closed lower despite the industrial production report. Mining firm Inco eased 25 cents to $34.95 and fertilizer company Potash lost 20 cents to $82.80.
* Oracle rallied 42 cents at $13.12 after the software firm late Monday said quarterly earnings beat analyst expectations.
Also in the software sector, Adobe Systems surged $1.02 to $38.83, Sybase gained 67 cents to $20.25 and Veritas Software was up 95 cents to $36.70.
* The news was less rosy in the computer networking sector. Extreme Networks fell $1.84 to $6.35 after saying sales would be $80 million to $85 million in the current quarter, below forecasts.
Other networkers also fell, including Cisco Systems, down 21 cents to $23.77, and Black Box, down 91 cents to $40.60.
* Coachmen Industries slumped $2.65 to $15.89. The recreational vehicle maker said 2003 earnings would be less than forecast because of a shortage of parts needed to make its RVs. Coachmen’s rivals also fell, including Fleetwood Enterprises, which lost 30 cents to $9.26, and Thor Industries, which dropped $1.40 to $55.70.
* Orbitz, an online travel agency backed by the five biggest U.S. airlines, priced its initial public offering at $26 a share, above the range of $22 to $24 its underwriters had estimated. A total of 12.2 million shares were sold, raising $317 million. The stock will begin trading today on Nasdaq under the symbol ORBZ.
