‘Santa’ Rally Delivers Again
Wall Street’s “Santa Claus rally” continued Wednesday, driving blue-chip indexes to new 3 1/2 -year highs.
Stocks got a boost from a decline in oil prices after the government said U.S. crude inventories rose last week.
The Dow Jones industrial average gained 56.46 points, or 0.5%, to 10,815.89, its highest level since June 2001.
Broader indexes also advanced as investors pushed money into stocks, extending the rally that began in late October.
The Standard & Poor’s 500 index added 4.12 points, or 0.3%, to 1,209.57, its highest close since August 2001.
Several indexes reached record levels, surpassing even their peaks at the height of the market boom in 1999 and 2000.
The New York Stock Exchange composite index rose 23.11 points, or 0.3%, to 7,190.14. That topped its record high of 7,164.55 set Sept. 1, 2000.
By contrast, the Dow remains 907 points, or 7.7%, below its record high of 11,722.98 set Jan. 14, 2000. The S&P; 500 is 21% below its record set in March 2000.
The technology-dominated Nasdaq composite index, which was up 6.12 points, or 0.3%, to 2,157.03 on Wednesday, is 57% below its record high of 5,048.62 reached in March 2000.
Rising stocks outnumbered losers by nearly 3 to 2 on the NYSE on Wednesday and by 5 to 4 on Nasdaq.
The market’s latest hot streak largely reflects optimism about the economy and corporate earnings growth in 2005, analysts say.
Investors were upbeat Wednesday after the government slightly raised its estimate of third-quarter gross domestic product growth to a 4% annualized rate from a previous estimate of 3.9%.
“The economy is going at a nice, comfortable clip and that’s a good backdrop from which to work for the market,” Erick Maronak, who helps manage $1.4 billion at Victory Newbridge Inc. in New York, told Bloomberg News.
A pullback in oil prices also helped Wall Street’s mood. The government said U.S. crude inventories rose 2.1 million barrels last week, to 295.9 million. Inventories of distillates, which include heating oil, also increased.
Near-term crude futures in New York slid $1.52 to $44.24 a barrel.
In the Treasury bond market, yields were little changed.
Stock traders say many investors are betting that the market will follow its usual seasonal pattern and continue to rally into January.
Unless oil prices surge anew or some geopolitical event deflates optimism in the next few weeks, the market’s next big hurdle will be fourth-quarter earnings reports, analysts say. Those reports will begin to roll out in the second week of January.
Analysts are expecting operating earnings of the S&P; 500 companies to be up 15% in the fourth quarter from a year earlier, according to a survey by Thomson First Call.
Year-over-year profit growth for the S&P; 500 is expected to slow to 7.4% in the first quarter, according to Thomson.
The deceleration of earnings growth could pose problems for the market in the first half of 2005, some experts say. But for now, the market’s seasonal bias is upward, many pros say.
Among Wednesday’s market highlights:
* Airline stocks gained as oil prices fell. Continental jumped 85 cents to $13.42, Frontier Air added 47 cents to $11.65 and AMR, parent of American Airlines, was up 46 cents to $10.75.
* Some industrial stocks added to their gains for the year. Eaton rose 86 cents to a record $71.31, Westlake Chemical gained $1.70 to $33.60 and Mechel Steel rallied 95 cents to $22.35.
* Mortgage giant Fannie Mae jumped $1.57 to $71.92. The company’s chief executive and chief financial officer were ousted late Tuesday after months of revelations of accounting problems at the company. Some investors had been hoping the executives would depart to give the company a clean start, analysts said.
* Qualcomm gained 46 cents to $44.44. The wireless technology company late Tuesday raised its profit forecast for the current quarter. Banc of America Securities raised its price target for the stock to $49 from $47.
* Energy stocks weakened. Baker Hughes fell $1 to $42.91, Berry Petroleum lost $1.84 to $47.75 and EOG Resources dropped $1.88 to $72.
