Stocks Rise on Economic Data
Wall Street inched up to fresh 19-month highs Tuesday as a trio of economic reports -- one on the gross domestic product, the others on consumer sentiment and spending -- provided investors additional evidence of an improving economy.
Volume was light on the last full trading day before the Christmas holiday.
The stock market will be open for a half session today, closed Thursday for Christmas and open for a half session Friday.
“The bottom line is the market has been creeping higher pretty much every day,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland. “It’s a continuation of the rally based on optimism for next year.”
The Dow Jones industrial average added 3.26 points, or less than 0.1%, closing at 10,341.26, after a five-day gain of 315 points. The blue-chip average is trading at its highest level since May 17, 2002. The tech-laden Nasdaq composite index gained 18.98 points, or 1%, to 1,974.78 and the Standard & Poor’s 500 index rose 3.08 points, or 0.3%, to 1,096.02, its highest level since May 23, 2002.
Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange and by 2 to 1 on Nasdaq.
The Commerce Department reported that the nation’s gross domestic product grew at an 8.2% annual rate in the third quarter, the best showing since 1983. The latest reading was identical to the preliminary estimate made a month ago.
In a separate report, the department said consumer spending rose by 0.4% in November, while incomes rose 0.5%, the best gain since May. The income reading was slightly above Wall Street’s expectations, but consumer spending was slightly below.
Meanwhile, the University of Michigan said its consumer sentiment gauge moved to 92.6 in December, down slightly from November’s figure of 93.7.
Still, December’s reading was higher than analysts had forecast.
The stock market typically sees strong gains at the end of December as investors put year-end bonuses and dividends to work. This year, however, might be different because stocks already have seen a large run-up since March.
In addition, terrorism concerns weigh on the market, particularly after the federal government Sunday raised the terror alert level and said Al Qaeda might attack during the holiday season, analysts said.
“It’s almost now being accepted as a given that the macroeconomy is on a very solid footing,” said Bill Meade, managing director at RBC Capital Markets. “What you’re looking at is a Christmas rally that wants to happen.”
“But given the fact that we keep seeing quotes from folks like [Defense Secretary] Donald Rumsfeld reminding us that we’re on an elevated terror alert,” he added, “it leaves doubt and uncertainty as to whether the Christmas rally will transpire.”
Bond prices fell after demand at the Treasury’s auction of $26 billion in two-year notes was weak, and there were signs of a slackening appetite for U.S. government debt among foreign buyers.
The yield on the two-year T-note, which moves in a direction opposite to that of the price, jumped to 1.92% from Monday’s close of 1.81%. The yield on the benchmark 10-year note climbed to 4.26% from 4.17% the day before.
In other highlights Tuesday:
* After closing up 12 cents at $25.28, shares of Dow member McDonald’s slid more than 3% in after-hours trading on the news that a U.S. industry official said a suspected case of mad cow disease was being investigated in Washington state.
Among other restaurant shares that fell in after-hours trading were Wendy’s, CKE Restaurants -- owner of the Carl’s Jr. chain -- and Lone Star Steakhouse & Saloon.
* Research in Motion jumped $23.51, or 51%, to $69.61 after the maker of the BlackBerry wireless device raised its fourth-quarter outlook; several brokerages also raised the company’s stock rating.
* AT&T; Wireless Services rose 34 cents to $7.75 after the Wall Street Journal reported that Cingular Wireless was exploring a merger or purchase of the cell phone company.
* Losers included American Greetings, which dropped $1.28 to $21.30, after the greeting card company lowered its 2004 earnings outlook, citing sluggish holiday sales.
* Target fell 13 cents to $38.03 after the retailer said December sales were coming in below estimates.
