Stocks Rise in Advance of Employment Report
U.S. stocks posted modest gains Thursday ahead of today’s October employment report. The Nasdaq composite index rose to within 1.2% of the 2,000 mark.
In Europe most markets were higher even though the Bank of England raised its key interest rate for the first time in three years -- potentially heralding the start of tighter credit in major industrialized countries.
Wall Street initially was unmoved by the government’s report Thursday of a plunge in the latest weekly unemployment benefit claims or by encouraging comments from Federal Reserve Chairman Alan Greenspan.
But buyers grew more confident as the session progressed. The Dow Jones industrial average ended with a gain of 36.14 points, or 0.4%, to 9,856.97, and winners topped losers by 19 to 13 on the New York Stock Exchange.
The Standard & Poor’s 500 index rose 6.24 points, or 0.6%, to 1,058.05.
For the technology-dominated Nasdaq index, the day’s gain of 17 points, or 0.9%, to 1,976.37 left the benchmark within easy striking distance of 2,000 -- a level last surpassed Jan. 15, 2002.
The Nasdaq index and several indexes of small- and mid-size stocks ended Thursday at their highest levels in at least 14 months.
Traders said some buyers were betting that today’s report on October employment would show a better-than-expected gain, which could cement the idea that the U.S. labor market is recovering and boost optimism about 2004 growth.
Investors “want to see if the rebound in employment has begun,” said Russ Koesterich, U.S. equity strategist at State Street Corp. “It’s the one part missing in the recovery.”
Greenspan, in a speech to a brokers conference, sounded upbeat about the economy and also suggested that the central bank was in no hurry to raise its benchmark short-term interest rate, now at 1%.
The Bank of England, however, decided Thursday to raise its key rate a quarter-point to 3.75%. That followed a rate increase by Australia’s central bank Wednesday.
The Bank of England’s monetary policy committee said in a statement that the reasons for raising rates included the global recovery’s “gathering momentum” and a roaring British housing market.
But the European Central Bank, also meeting Thursday, left its benchmark rate at 2%.
Nervousness about the economy’s strength and the possibility that the Fed would tighten credit in 2004 helped spur another sell-off in the Treasury bond market. The yield on the 10-year T-note rose to 4.41% from 4.35% on Wednesday.
The yield on the two-year T-note rose to 1.97% from 1.93% and is nearing the recent peak of 2.04% reached Sept. 2.
“At some point in the next few months, we expect yields will break out above their recent trading range as the market begins to anticipate action from the Fed to raise rates,” Bear Stearns Cos. analysts warned in a research note, according to Bloomberg News.
The economic news was good for the dollar Thursday, lifting it to a seven-week high of $1.141 against the euro.
In market highlights:
* Cisco Systems led the tech sector higher, rising $1.10, or 5.1%, to $22.90 after reporting higher-than-expected sales and profit late Wednesday.
Other tech winners included IBM, up $1.01 to $89.34; KLA Tencor, up $1.44 to $60.88; Varian, up $3.44 to $39.83; and SAP, up $1.19 to $38.30.
* Railroad stocks continued their recent hot streak on optimism about the economy. Union Pacific jumped $1.62 to $64.93, and CSX surged $1.43 to $33.77.
* Retail stocks were mostly higher amid some mixed sales reports for October. Gap rose $1.57 to $20.28, May Department Stores gained $1.24, and Pier One jumped $1.67 to $25.85.
* Shares of mutual fund companies were mixed as investors reacted to the latest developments in the fund trading scandal. Alliance Capital fell 38 cents to $30.15 after saying it is talking to the Securities and Exchange Commission about a probe into fund trading. The stock has slumped 21% since mid-July.
But T. Rowe Price surged $3.11 to $43.56 after Merrill Lynch raised its rating on the stock to “buy” from “neutral,” saying the firm could win assets from clients that leave rivals tainted by the scandal.
* The initial public stock offering of drug firm NitroMed began trading Thursday and got a poor reception. The shares, priced at $11 on Wednesday, fell $1.71 to $9.29. Another drug IPO, Pharmion, closed at $14, unchanged from its offering price.
Market Roundup, C6-7
