Small Gains Push Indexes to New Highs for the Year
Stocks rose slightly Thursday, building on the rally of the previous two days, and Treasury yields resumed their slide as investors scrutinized a new batch of lukewarm economic data.
The government issued two reports showing U.S. jobless claims fell last week, although less than expected, while retail sales inched higher in May. The data, which largely met analysts’ expectations, painted a picture of a mild recovery at best.
The Dow Jones industrial average gained 13.33 points, or 0.2%, to 9,196.55; the broader Standard & Poor’s 500 index climbed 1.03 points, or 0.1%, to 998.51, falling just shy of the closely watched 1,000 level; and the technology-laced Nasdaq composite added 7.60 points, or 0.5%, to 1,653.62. All three indexes closed at new 2003 highs.
Seven stocks rose for every five that fell on the New York Stock Exchange, and winners topped losers by a slim margin on Nasdaq. Trading was active.
The S&P; has surged 25% from its mid-March low as investors have bet on an economic recovery in the second half, although skeptics say the market has come too far too fast.
“The institutional investors, the pros if you will, are pretty darn optimistic at this point,” said Hank Herrmann, chief investment officer at Waddell & Reed Financial. “Retail investors are getting more optimistic, but they’re certainly not euphoric.”
Treasury yields fell to new generational lows amid a growing belief that the Federal Reserve will cut interest rates by at least a quarter-point when it meets June 24 and 25 in an attempt to stave off the danger of deflation. The yield on the benchmark 10-year T-note slid to 3.16% from 3.21% on Wednesday.
“It looks like the Treasury market believes the deflationary forces are winning out,” Christopher Sullivan, who manages fixed-income assets at the United Nations Federal Credit Union in New York, told Bloomberg News.
Low interest rates continue to take a toll on money market mutual funds, among other savings vehicles, and another rate cut could entice some investors to step up their stock allocations, analysts said.
Assets of the nation’s retail money market mutual funds fell below $1 trillion in the last week, sliding $4.4 billion to $995.7 billion, according to the Investment Company Institute, the fund industry’s main trade group.
The average annualized yield on taxable money funds has sunk to a record low 0.68%, according to the Money Fund Report, and another Fed cut would slash those yields further.
In currency trading, the dollar fell against the euro and the Japanese yen on the murky U.S. economic reports.
Oil prices fell for the first time in six sessions, easing from three-month highs as Iraq sold its first oil since U.S.-led forces invaded in March. Crude for July delivery fell 85 cents to $31.51 a barrel in New York.
In other highlights:
* FormFactor surged $3.58 to $17.58 as investors gobbled up the year’s first pure tech-sector initial public offering. The stock, which trades under the symbol FORM on Nasdaq, was priced at $14 as the chip equipment maker boosted the size of the deal and raised $84 million.
* Big gainers included AT&T;, which rose $1.03 to $21.53 on an analyst upgrade; Allied Waste Industries, up $1.16 to $10.91; and Xerox, which climbed 87 cents to a new 52-week high of $11.57 after announcing a plan to reduce its finance costs.
* H&R; Block slipped $1.87 to $42.11 after the nation’s largest tax preparer posted quarterly profit that fell short of expectations.
* Winn-Dixie Stores slumped $1.80 to $12.87 after the supermarket chain lowered profit guidance for the current quarter.
* In the biotech sector, Cell Therapeutics jumped $1.76 to $13.90 and Maxim Pharmaceuticals soared $1.60 to $6.60, but InterMune tumbled $8.36 to $16.74 after warning of a revenue shortfall.
* Altria Group lost 78 cents to $42.90 after the Illinois Supreme Court declined to hear an appeal of the $10.1-billion verdict against the company’s Philip Morris tobacco unit.
Market Roundup, C4-5
