Blue Chips Rise Despite Dollar, Oil Concerns
A falling dollar and rising oil and gold prices failed to derail the rally in blue chip stocks Wednesday as major share indexes closed higher thanks to late buying.
The Dow Jones industrial average and the Standard & Poor’s 500 index finished at fresh 19-month highs, though the Nasdaq composite lagged for a third day.
The Dow added 15.70 points, or 0.2%, to 10,145.26, and the S&P; inched up 1.35 points, or 0.1%, to 1,076.48.
The Nasdaq index eased 2.96 points, or 0.2%, to 1,921.33. It had been down as much as 14 points.
Winners outnumbered losers by 3 to 2 on the New York Stock Exchange, while losers had a 5-4 edge on Nasdaq.
Many investors are focusing on recent strong economic reports that underpin the case for stocks in 2004, said Michael Sheldon, chief market strategist at money manager Spencer Clarke in New York.
“Corporate profits are rising, interest rates remain low, and we believe there’s further upside for equity prices,” he said.
That view is overriding concerns investors may have, such as about the renewed climb in energy prices, analysts said. Crude oil prices rose Wednesday to their highest level since mid-March.
The dollar’s continued weakness also has troubled some observers. The euro hit another record high against the dollar Wednesday, closing at $1.24 in New York, up from $1.234 on Tuesday. As recently as Nov. 1, the euro was worth $1.15.
The dollar’s rapid decline has raised fears that foreign investors might begin to dump dollar-denominated securities because the currency’s losses are devaluing their holdings.
But economists note that the dollar’s weakness has been most pronounced lately against the euro, the British pound and the Swiss franc. Against the Japanese yen, by contrast, the dollar has been trading in a narrow range for weeks as the Bank of Japan has intervened to halt the yen’s advance.
“It’s not a free fall for the dollar -- yet,” said Jay Bryson, economist at Wachovia Corp. in Charlotte, N.C.
What’s more, worries that foreigners might drive up U.S. interest rates by dumping Treasury bonds have proved unwarranted so far. Long-term bond yields are below their highs of late summer and eased further Wednesday. The 10-year T-note fell to 4.18% from 4.21% on Tuesday.
On the plus side, the falling dollar is making U.S. exports cheaper abroad and is raising the value of foreign-generated earnings for U.S. multinationals.
Among potential beneficiaries of a weaker dollar, heavy-equipment maker Caterpillar rallied $1 to $82.02, and personal products maker Colgate-Palmolive rose 72 cents to $53.88.
The dollar’s woes continue to help gold: Near-term futures for the metal jumped $4.30 to $412 an ounce in New York, nearly an eight-year high.
A weaker dollar makes gold cheaper for foreign investors because the metal is priced in dollars worldwide.
Silver prices rose to the highest level since 1998. The near-term futures contract in New York gained 6.3 cents to $5.69 an ounce.
On Wall Street, the trend as year-end approaches has been for investors to shift out of some of the best-performing stocks this year -- such as in the technology sector -- and into blue chips that have lagged.
The Dow has risen 2.5% since Dec. 1. In the same period, the SOX index of semiconductor-related stocks has fallen 10.8% and the Nasdaq index has lost 3.4%.
Among Wednesday’s highlights:
* Energy stocks rallied with oil prices. Exxon Mobil rose 41 cents to $38.88, ChevronTexaco jumped $1.04 to $81.74, and Sunoco was up $1.03 to $50.04.
* Other commodity-related stocks rebounding included Inco, up $1.94 to $36.89; Georgia-Pacific, up 83 cents to $29.43; and Alcoa, up 63 cents to $35.61.
* FedEx slumped $3.30 to $71.01 after saying that earnings in its most recent quarter fell 63% because of restructuring charges and troubles in its ground-delivery unit.
* Brokerage Bear Stearns jumped $2.10 to $76.60 after reporting quarterly earnings up 51%, surpassing estimates.
* Many retailers rose after struggling in recent sessions on concerns about holiday sales. J.C. Penney rallied 87 cents to $24.19, Sears was up $1.21 to $44.80, Ann Taylor gained $1.42 to $37.36, and Gap rose 64 cents to $22.05.
* In Taiwan, the main stock index had its biggest drop in more than seven months after the island’s health minister said a worker in a military laboratory tested positive for SARS.
The Taiwan market’s index lost 135.22 points, or 2.3%, to 5,752.01. It is up 30% this year, compared with 22.4% for the U.S. S&P; 500.
Other Asian markets also lost ground. Hong Kong’s index slid 0.6%, the South Korean market fell 1.3%, and Japan’s Nikkei-225 index slumped 1.7%.
