Stocks Continue Rally Despite Swooning Dollar
Stocks kept their rally on track Tuesday as key indexes closed either at 52-week highs or close to them.
The market gained despite a new plunge in the dollar and a jump in Treasury bond yields.
The Dow Jones industrial average rose 59.63 points, or 0.6%, to 9,654.61, nearing the 14-month closing high of 9,659.13 reached Sept. 18.
The Nasdaq composite was up 14.39 points, or 0.8%, to 1,907.85, and the Standard & Poor’s 500 added 4.90 points, or 0.5%, to 1,039.25. Both closed just under their recent peaks of 1,909.55 and 1,039.58, respectively, set Sept. 18.
Some other indexes rose above their September highs. The small-stock Russell 2,000 rose 4.05 points, or 0.8%, to 520.77, its best close since April 2002. Also hitting 52-week highs were the S&P; small-stock and mid-size stock indexes.
Rising issues outnumbered losers by about 20 to 13 on the New York Stock Exchange and by 19 to 12 on Nasdaq in moderate trading.
The market’s ability to snap back quickly from a late-September sell-off suggests that many investors had been waiting on the sidelines and were eager to pick up stocks at even modestly discounted prices.
Encouraged by largely upbeat economic data in recent months, many investors are betting that third- and fourth-quarter corporate earnings will show substantial strength.
On Tuesday, drugstore chain CVS raised its third-quarter profit estimate to 46 cents a share from a previous forecast of 42 to 44 cents. CVS shares jumped $1.48 to $33.61.
Also, aluminum giant Alcoa said after regular trading ended that third-quarter earnings rose 45%, beating expectations. The stock, down 8 cents to $28.19 in regular trading, rose to $28.89 in after-hours activity.
Investors “are often surprised by the kinds of earnings companies can produce” after cutting costs after a recession, Gordon Fowler, investment chief at Glenmede Trust in Philadelphia, told Bloomberg News. “As long as the [economic] recovery continues in 2004, the market should continue to improve,” he said.
Wall Street also appears to be encouraged, rather than discouraged, by the sinking dollar. A weaker U.S. currency means American exporters’ goods become less expensive overseas.
The dollar fell against most of its key rivals Tuesday, continuing a down trend that has accelerated since early September.
The buck fell to 109.79 yen in New York, down from 111.03 on Monday and a three-year low.
Against the Canadian dollar, the U.S. currency hit an eight-year low; it fell to a six-year low against the Australian dollar.
The euro climbed to $1.177 in New York from $1.171 on Monday.
The United States and its major allies signaled Sept. 20 that they were sanctioning a lower dollar. “They are basically allowing the dollar to fall” to help U.S. manufacturers compete abroad, Larry Brickman, a currency strategist at Bank of America in New York, told Bloomberg News.
Among multinational stocks, Caterpillar rose 41 cents to $74.42, McDonald’s gained 62 cents to $24.72, and Procter & Gamble jumped $1.09 to $95.10.
Still, the Bank of Japan is trying to control the dollar’s descent against the yen: Japanese authorities sold the yen Tuesday after it hit 109.37 per dollar, traders said. A stronger yen could hurt Japanese exporters’ prospects by boosting the prices of their products abroad.
The dollar’s slide also raises the prospect that foreign investors will balk at buying U.S. bonds because foreigners’ holdings of American securities are devalued as the currency falls.
Nervousness in the Treasury market pushed bond prices down and yields up Tuesday. The yield on the benchmark 10-year T-note rose to 4.26% from 4.17% on Monday and now is the highest since Sept. 16.
Investors’ appetite for new Treasury issues will be tested as the government sells $16 billion in five-year notes today and $9 billion in 10-year inflation-protected notes Thursday.
