Stocks Surge in Late Trading
Investors’ growing optimism carried Wall Street’s rally into a new week Monday, with stocks gathering momentum and surging late in the session despite an absence of market-moving news.
The dollar jumped to a four-month high against the euro, but bond prices continued to slide, sending yields up, on speculation that the Federal Reserve could raise interest rates by fall if the economy remains strong.
Oil prices steadied after steep losses last week, and gold hit a two-week low.
On Wall Street, many heavy-industry and technology issues led the way, as they did on Friday after the government said the economy created a net 308,000 new jobs in March, the most in nearly four years.
The employment report stoked hopes that the economy’s rebound might be sustained well into 2005, which could be particularly good for companies whose fortunes are closely tied to economic swings.
“The jobs data last Friday has provided the missing ingredient that many people have been looking for over the last several months,” said Michael Sheldon, chief market strategist at Spencer Clarke.
The Dow industrial average gained 87.78 points, or 0.8%, to a one-month high of 10,558.37, after rising 2.5% last week.
Broader stock indicators also advanced. The Standard & Poor’s 500 index rose 8.76 points, or 0.8%, to 1,150.57 -- within 8 points of the two-year closing high reached Feb. 11. The S&P; was up 3.1% last week.
S&P; indexes of mid-size stocks and smaller stocks hit record highs.
The technology-centered Nasdaq composite index was up 21.95 points, or 1.1%, to 2,079.12, its highest level since Feb. 17. Last week, Nasdaq climbed 5%.
Winners topped losers by more than 3 to 2 on Nasdaq, but losers had a modest edge on the New York Stock Exchange. Interest-rate-sensitive stocks on the NYSE, including real-estate-related shares, were weak.
As the economy improves, one risk is that the Fed could be compelled to tighten credit to keep a lid on inflation.
“It’s not a question of when the Fed will raise rates -- of course they are,” said John Caldwell, chief investment strategist for KeyBanc Capital Markets Financial Group. “The more important question is: Should they be raising rates sooner rather than later? The longer they wait, they more they may feel they have to act more aggressively.”
Such concerns caused prices of Treasury notes to fall sharply again, pushing yields up. The benchmark 10-year T-note rose to 4.21% from 4.14% on Friday, when yields rocketed on the strong jobs report. The T-note yield now is the highest since early January.
Despite interest rate worries, in the near term robust first-quarter earnings reports could keep stocks moving ahead, market bulls say.
Among Monday’s highlights:
* Health insurer Cigna jumped $6.90 to $67.55. The 11% gain -- the biggest in the S&P; 500 -- came after the company raised its first-quarter profit forecast, excluding some items, to a range of $1.75 to $1.95 a share. Analysts had expected $1.33 a share, on average.
Also in the health insurance sector, Oxford Health rose for an eighth straight day, surging $7.65 to $57.97. WellChoice, another health insurer, is in talks to acquire Oxford, one of the biggest insurers in the New York area, the Wall Street Journal reported, citing unidentified sources. WellChoice lost 36 cents to $37.09.
* In the industrial sector, General Motors rose $1.05 to $47.65, Deere surged $1.54 to $71.72 and Illinois Tool Works was up $1.62 to $81.27.
* Tech shares were led higher by Apple Computer, up 82 cents to $28.32, and Ask Jeeves, up $1.32 to $39.26.
* American International Group rose $1.69 to $75.99. The insurance giant’s shares are poised to rise as high as $93 by 2005 as the company benefits from higher demand for retirement planning and life insurance, a Barron’s magazine article predicted.
* Gaming stocks were broadly higher, led by Mandalay Resort Group, which jumped $3.02 to $61.23 after saying first-quarter profit would beat estimates.
* CVS rose $2.57 to $37.35 after it agreed to purchase 1,260 Eckerd stores in Southern states and Eckerd’s pharmacy benefits management program for $2.15 billion from J.C. Penney, which added 7 cents to $34.90.
* Mortgage lenders and home builders fell for a second day on concern higher interest rates could stifle demand for new houses. Countrywide Financial dropped $3.33 to $87.92 and Indymac Bancorp lost 96 cents to $35.17. Among home builders, Lennar lost 89 cents to $51.33 and D.R. Horton declined $1.21 to $32.52.
Real estate investment trusts also were sharply lower. Rouse slid $2.32 to $50.60, CenterPoint Properties dropped $2.27 to $79.10, Kimco Realty tumbled $2.55 to $47.50 and Macerich slumped $2.74 to $50.70.
