Economic Data Give Stocks a Lift; Yields Rise
The stock market on Friday welcomed December data showing stronger industrial production and a decline in wholesale prices, ending a troubled week on Wall Street on a positive note.
The Dow Jones industrial average added 52.17 points, or 0.5%, to 10,558.00, and the broader market also advanced. The Dow was helped by Walt Disney, which jumped 2% on an analyst’s upgrade.
Major indexes nonetheless suffered losses for a second straight week.
The dollar rose the most in a week against the euro, after a Federal Reserve official said policymakers might be more aggressive in raising interest rates. The euro fell to $1.311 from $1.320 on Thursday.
The comments by William Poole, president of the Fed’s St. Louis branch, also helped to push up Treasury bond yields. Poole said late Thursday that the Fed might abandon its plan to lift rates at a “measured” pace.
Investors are “pricing in a more aggressive Fed,” said William Prophet, a rate strategist at UBS Securities. “All the data these days suggest that the recovery is taking place despite the fact that the Fed is raising rates.”
The yield on the benchmark 10-year T-note shot up to 4.22% from 4.16% on Thursday but was down from 4.27% a week ago.
Bonds also were hurt, and stocks were helped, by the Fed’s report that industrial production increased 0.8% in December, making last year the busiest for factories, mines and utilities since 2000.
Even as the economy expanded in December, the government said, its producer price index fell 0.7%, dragged down by falling energy prices. It was much more than the 0.2% drop economists had expected.
Excluding food and energy, producer prices rose 0.1% last month, the smallest gain since July. For the year, however, that so-called core inflation measure was up 2.2%, the biggest increase since a 2.5% rise in 1998.
All in all, stock investors liked what they saw in the economic data Friday, analysts said. Winners topped losers by 2 to 1 on the New York Stock Exchange and on Nasdaq.
The Standard & Poor’s 500 index was up 7.07 points, or 0.6%, at 1,184.52, and the Nasdaq composite climbed 17.35 points, or 0.8%, to 2,087.91.
Steel, Internet and home builders’ shares led the rally.
But the gains didn’t recoup all of the losses stocks suffered earlier in the week amid rebounding oil prices and some disappointing corporate earnings reports.
For the week, the Dow fell 0.4%, the S&P; 500 was down 0.1%, and Nasdaq lost 0.03%.
Investors entered 2005 with a caution that surprised many analysts, but they could regain confidence with good economic data and strong earnings reports in the holiday-shortened week ahead. Markets will be closed Monday in observance of the Martin Luther King Jr. holiday.
“The economic numbers today were good -- we’re building off that -- but really, it’s all about earnings next week, especially [companies’] guidance for the year,” said Jay Suskind, head trader at Ryan Beck & Co.
Among Friday’s highlights:
* Oil prices continued to rise as investors hedged against the return of wintry weather in the East. Near-term oil futures in New York added 34 cents to $48.38 a barrel, the highest since Nov. 30 and a gain of $2.95 for the week.
* Marsh & McLennan rose $1.14 to $31.51 on news reports that the insurance broker has offered to pay $600 million to settle New York Atty. Gen. Eliot Spitzer’s charges of bid rigging and price fixing. Spitzer is reportedly seeking $750 million and a public apology from the company.
* Disney gained 55 cents to $28.30, a three-year high, after Merrill Lynch analyst Jessica Reif Cohen upgraded the stock to “buy” from “neutral.” The company may earn $1.26 a share this year as its theme park unit recovers, ratings at its ABC TV unit improve and its cable business grows, Reif Cohen said.
