Stocks Advance on Fed Action, Oil Price Drop
The Standard & Poor’s 500 index reached its highest close since the Sept. 11, 2001, terror attacks Thursday as stocks surged on the Federal Reserve’s upbeat assessment of the economy and a sharp drop in oil prices.
Continuing a rally that started before the presidential election, Wall Street enjoyed impressive gains after Wednesday’s Fed policy statement, which outlined an improving labor market and little danger of inflation. The Fed raised the benchmark interest rate a quarter percentage point to 2%, as was widely expected.
Falling oil prices also spurred buyers. Light crude dropped to $47.42 a barrel, down $1.44, in New York trading.
Despite the solid advance, trading was muted somewhat as the bond markets were closed for the Veterans Day holiday. Bonds can have an effect on stock trading, and some analysts questioned whether Thursday’s rally would set the stage for further highs.
“You have to take today’s action with a grain of salt, what with bonds not trading today, but sure, it’s nice to see things moving up,” said Bryan Piskorowski, market analyst at Wachovia Securities. “But really, with the jobs report last week and the Fed move, the market’s still treading water, and we’re going to need another catalyst to break out higher.”
The S&P; 500 was up 10.57 points, or 0.91%, at 1,173.48, its best showing since Aug. 27, 2001.
Other stock indicators also rose substantially. The Dow Jones industrial average rose 84.36 points, or 0.81%, to 10,469.84, its best closing since June 23. The Nasdaq index gained 26.71, or 1.31%, to 2,061.27. Nasdaq last closed above that level April 12.
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange.
After three days of minimal moves, the major indexes saw a resurgence of the rally first spurred by a relatively smooth presidential election, continuing drops in crude oil futures and a better-than-expected jobs report for October. November and December are also traditionally the strongest months for the stock market.
Despite the gains, the volume of shares traded dropped off from recent sessions, and analysts said many investors were waiting to see whether there would be a sell-off based on profit taking -- or whether stocks would defy conventional wisdom and move higher.
“I see a lot of people waiting for a normal retracement before they enter back into this market, but the market sometimes will do something just to confound as many people as it can,” said Bill Groenveld, head trader at VFinance Investments.
“We’re definitely in a buyer’s market, and either way it goes, people are staying in and watching things pretty close with their finger on the trigger,” he added.
Among Thursday’s market highlights:
* Technology stocks showed strength. Intel, grappling with slumping demand, climbed after naming a successor to Chief Executive Craig R. Barrett, rising 31 cents to $23.17. Advanced Micro Devices gained $1.30 to $18.59 as Merrill Lynch recommended buying shares of the company, which is Intel’s biggest competitor in personal-computer processors.
Microsoft added 25 cents to $29.98 a day after debuting a new Internet search engine designed to grab market share from Google. Unfazed, Google soared $15.16 to $183.02.
Cisco Systems, which fell sharply Wednesday on earnings that disappointed Wall Street, regained 30 cents to $18.74.
* Shares of Coca-Cola and Tiffany sank after the companies reduced their earnings targets. Coca-Cola lost 21 cents to $40.96 after saying slumping soft-drink sales in the U.S. and increased competition from PepsiCo will hurt its bottom line.
Tiffany fell $1.84, or 5.7%, to $30.29, for the steepest drop in the S&P; 500. The No. 1 U.S. seller of luxury jewelry said it expected 2004 profit of up to $1.48 a share. It had previously projected at least $1.55 a share.
* Retailer Target shed 11 cents to $50.77 after it announced earnings that were slightly below Wall Street forecasts. Target saw a 78% jump in third-quarter net income, but much of the gain was fueled by the sale of its Mervyn’s department store unit.
* Starbucks saw a 49% rise in its quarterly earnings, but disappointed investors with a future profit outlook that came in below expectations. Starbucks nonetheless gained 15 cents to $55.44 after languishing in negative territory most of the session.
* Taser International rose $3.11 to $57.95. The stun gun maker is selling a version that reaches 25 feet, with accuracy comparable to its gun that shoots as far as 21 feet.
* News Corp. completed its reincorporation as a U.S. company. Its shares will begin regular trading on the NYSE today. The company said it would use the ticker symbol NWS for its Class B voting shares and NWS.A for Class A nonvoting shares.