Strong Data Boost Stocks
Another batch of positive economic data helped drive share prices sharply higher Thursday as more investors jumped aboard the year-end rally.
Blue-chip indexes rose to 19-month highs and smaller stocks rebounded after struggling in recent days.
Buying accelerated in the afternoon, triggered by program trading related to today’s quadruple-witching day, the quarterly expiration of index futures and options as well as individual stock futures and options.
“We do have a backdrop of better economic data which is helping lift things,” said Todd Clark, head of listed equity trading at Wells Fargo Securities. “But it’s the forces surrounding [the] expiration which are really driving the market.”
Traders using strategies involving options or futures sometimes need to buy stocks as contracts expire to settle their bets.
The Dow closed up 102.82 points, or 1%, at 10,248.08, for a three-day gain of 225 points. It was the index’s highest close since May 17, 2002.
The Standard & Poor’s 500 index rose 12.70 points, or 1.2%, to 1,089.18, its highest level since May 23, 2002.
The Nasdaq composite index, which had lagged in recent sessions, shot up 34.85 points, or 1.8%, to 1,956.18. It still is below the recent peak of 1,989.82 reached on Dec. 1.
Winners led losers by almost 3 to 1 on the New York Stock Exchange and by 2 to 1 on Nasdaq.
The Labor Department said Thursday that initial unemployment benefit claims fell last week by a seasonally adjusted 22,000 to 353,000, the lowest since Nov. 1. The decline was much larger than analysts’ expectations.
Meanwhile, the Conference Board reported that its index of leading economic indicators rose 0.3% last month, suggesting that the economy’s rebound could be sustained.
And the Federal Reserve Bank of Philadelphia said its regional business conditions index posted its seventh straight monthly gain in December.
“The numbers show that the jobs situation might be better than people expected all along ... and the economy is actually going well,” said Tim Smalls, a trader at SG Cowen Securities.
Though the improving economic picture might be expected to push bond yields higher, instead yields have been dropping. The 10-year Treasury note yield fell to 4.13% Thursday from 4.18% Wednesday and now is the lowest since Oct. 2.
For stock investors, the combination of a stronger economy and lower interest rates provides more incentive to drive share prices up, analysts said.
Among Thursday’s highlights:
* Leaders in the Dow included Honeywell, up $1.31 to $31.57; American Express, up $1.77 to $46.77; and Caterpillar, up $1.69 to $83.71.
* Semiconductor stocks rebounded after recent profit taking. The SOX chip-stock index jumped 4%.
* Energy stocks rallied further as crude oil futures rose to a nine-month high, adding 36 cents to $33.71 a barrel in New York. Low inventories are keeping crude prices up, analysts say.
BP rose $1.09 to $48.17, Amerada Hess gained $2.58 to $53.50 and Noble Energy added $1.01 to $45.65.
* Bed Bath & Beyond jumped $2.21 to $42.17 after the retailer posted quarterly profit above expectations. But Colgate-Palmolive fell $3.58 to $50.30 after it warning that first-quarter 2004 earnings would be below estimates because of tougher competition.
