Wall Street Gains Amid a Broad Rally
Wall Street on Wednesday staged its best rally since mid-June, buoyed by a bigger-than-expected rise in U.S. factory orders in May.
Shaking off recent profit taking, the Dow Jones industrial average jumped 101.89 points, or 1.1%, to 9,142.84, while the broader Standard & Poor’s 500 index was up 11.43 points, or 1.2%, to 993.75.
The Nasdaq composite index, dominated by technology issues, recovered all of its recent losses as it surged to a 13-month high, up 38.60 points, or 2.4%, to 1,678.73.
Indexes of smaller stocks also hit their highest levels in more than a year. The Russell 2,000 index advanced 9.72 points, or 2.2%, to 458.89. It is up 20% this year.
Winners outnumbered losers by about 3 to 1 on the New York Stock Exchange and Nasdaq.
It may have helped the market that Treasury bond yields pulled back after rising early in the day on the upbeat economic data. The yield on the 10-year T-note dipped to 3.54% from 3.55% on Tuesday after rising as high as 3.61% in the morning.
Subway closures in New York, after authorities found a suspicious envelope containing white powder, drove some investors to the relative safety of government bonds.
Some traders said Treasury bonds also benefited from California’s budget crisis as nervous owners of the state’s debt sold some of those holdings and bought Treasuries instead.
In separate announcements, credit-rating firms Standard & Poor’s and Moody’s Investors Service said Wednesday that they may downgrade California’s already rock-bottom rating because of the protracted budget battle in Sacramento.
California’s bonds have fallen in price in recent weeks, driving yields higher, amid fears of financial fallout as the state struggles to close a $38-billion budget gap.
On Wall Street, stocks climbed after government figures showed an unexpected increase in May factory orders. That renewed investors’ hopes for an economic rebound in the second half of the year.
An increasing number of investors “believe the recovery story and want to be invested to profit from it,” said Lynn Reaser, chief economist at Banc of America Capital Management.
The market had surged from mid-March to mid-June on faith in an economic turnaround. Many stocks then pulled back in the final two weeks of June.
Investors’ willingness to jump back in during the last two sessions shows that there are large sums of cash on the sidelines waiting for an opportunity to get in, analysts say.
“Everything’s in place to continue the rally into the third quarter,” said Dan Lewis, who helps manage $2 billion at Trusco Capital in Orlando, Fla.
Wall Street today will get a key piece of data on the economy when the government reports on June employment trends. The market will close early today, at 10 a.m. PDT, ahead of the Independence Day holiday Friday.
Starting next week, the market’s primary focus will be on second-quarter corporate earnings reports, analysts say. Investors are waiting to hear whether executives will give encouraging assessments of their companies’ potential in the second half.
Among Wednesday’s highlights:
* Microsoft helped stoke the tech sector after Merrill Lynch upgraded the stock to “buy” from “neutral,” citing better personal computer sales and expectations the software giant may boost its annual dividend to as much as 26 cents a share from 8 cents. Microsoft shares rose 73 cents, or 2.8%, to $26.88.
Among other tech stocks, Intel added 80 cents to $22.21, Lexmark International jumped $3.45 to $74.35, and Veritas Software gained $1.07 to $29.96.
But after regular trading ended, Documentum tumbled to $16.25 from its Nasdaq close of $19.75 after the software firm said second-quarter sales and profit would be lower than expected.
* In the Internet sector -- one of the market’s hottest corners this year -- EBay rose $2.66 to a three-year high of $109.26, Digital River jumped $3.07 to $21.93, and Yahoo was up 71 cents to $34.35.
* Starbucks led consumer-related growth stocks higher, surging $1.64 to a record $26.97, after saying June sales rose 10% at stores open at least one year. Other winners included Krispy Kreme Doughnuts, up $2.18 to $43.45, and Panera Bread, up $1.39 to $42.70.
* Brokerage Jefferies Group soared $3.53 to $54.10 after Wachovia Securities raised its rating on the firm to “outperform” from “market perform.”
* Biotech firm Abgenix gained 79 cents to $11.15 in part on rumors, reported by Reuters, that Amgen might be interested in bidding for the firm. Amgen declined to comment; Abgenix executives couldn’t be reached for comment. Amgen rose $1.36 to $67.21.
* Intrawest surged $1.08 to $14.28 after Vancouver, Canada, won the competition to hold the 2010 Winter Olympics. Intrawest owns the Whistler Blackcomb ski resort north of Vancouver.
