Dollar Drops Back but Stock Prices Edge Up
The euro hit a record high against the dollar Thursday, suggesting that more woes await the greenback in 2005.
But that wasn’t enough to derail Wall Street’s “Santa Claus rally.” Most U.S. stock market indexes edged up in a session that saw the fat man himself ring the closing bell at the New York Stock Exchange.
The Dow Jones industrial average rose for the eighth time in nine sessions, adding 11.23 points, or 0.1%, to 10,827.12. It was a fresh 3 1/2 -year high for the blue-chip index.
The broader Standard & Poor’s 500 index eked out a gain of 0.56 point, or less than 0.1%, to 1,210.13, its highest since August 2001. The Nasdaq composite was up 3.59 points, or 0.2%, to 2,160.62, nearing the three-year high of 2,162.55 it hit last week.
Key indexes of smaller stocks ended at record highs, continuing their hot streak this year.
Trading slowed sharply as the three-day holiday weekend approached. All U.S. markets, and many markets around the world, are closed today in observance of Christmas.
The dollar provided the only real fireworks Thursday as it resumed its decline against other major currencies. The euro surged to a record $1.349 from $1.338 on Wednesday, as some currency traders bet that the dollar is more likely to decline than rebound in the new year.
The dollar also dipped to 103.70 yen from 104.08 on Wednesday, and slid against the Canadian dollar, the Australian dollar and other rivals.
Thin trading in currency markets probably exaggerated the greenback’s losses, analysts said. Still, many traders say there is little fundamental support for the dollar, given the huge U.S. budget and trade deficits and the sense that the Bush administration would be happy to see the buck fall further in 2005.
The perception is that “the U.S. administration is not going to do anything to stem the dollar’s decline,” said Sophia Drossos, a currency strategist at Morgan Stanley in New York.
Although a weaker dollar diminishes Americans’ purchasing power abroad, it makes U.S. exports cheaper for foreign buyers, helping American industry.
Wall Street has mostly chosen to see the falling dollar in a positive light over the last two months: The Dow has jumped 1,078 points, or 11.1%, since Oct. 25, egged on by optimism about the economy and by a drop in crude oil prices.
The stock market typically is strong at year’s end and the start of a new year. That is keeping bears at bay, traders said.
“Right now, there’s just no selling going on,” said Todd Leone, managing director of equity trading at SG Cowen Securities.
U.S. economic data reported Thursday generally were upbeat, although some analysts were disappointed that durable goods orders fell in November after excluding transportation orders.
“On balance, the economic news was OK, not blockbuster, but good enough,” said Ken Tower, chief market strategist for Charles Schwab’s CyberTrader. “We’re still in a very robust rally, and there are no signs that I can see that would stop it from continuing.”
For the week, the Dow rose 1.7%, the S&P; gained 1.3% and Nasdaq climbed 1.2%.
In the bond market, yields continued to rise. The 10-year Treasury note ended at 4.21%, up from 4.20% on Wednesday.
Among Thursday’s market highlights:
* Small stock indexes reached another in a series of record highs. The Russell 2,000 index gained 0.91 point, or 0.1%, to 649.37, and is up 16.6% this year. The S&P; small-cap index added less than 0.1% to 327.41, and is up 21.1% year to date.
By contrast, the Dow index is up 3.6% this year. The S&P; 500 is up 8.8%.
* 3M led advances among manufacturers after the durable goods report. The shares gained $1.04 to $82.55. Other winners included Steel Dynamics, up 55 cents to $38.26, and DaimlerChrysler, up 36 cents to $47.81.
* Red Hat, the world’s biggest distributor of the Linux computer-operating system, tumbled $2.04 to $13.03. The company said fiscal third-quarter revenue was $50.9 million, less than the $51.8 million average estimate of analysts polled by Thomson First Call.
* Major drug stocks, beaten down this year, continued to attract bargain hunters. Pfizer rose 12 cents to $26.07, Eli Lilly gained 64 cents to $57.26 and Schering-Plough was up 52 cents to $20.62.
