Stocks Continue to Rally
Wall Street powered ahead in another broad rally Wednesday, taking heart from Federal Reserve Chairman Alan Greenspan’s upbeat assessment of the economy.
Lower oil prices and strong earnings reports also helped investors’ mood.
After struggling in the first half of the session, share prices swept upward in the second half. The advance pushed the technology-dominated Nasdaq composite index into the black for the first time this year, and to a four-year high.
Nasdaq gained 15.39 points, or 0.7%, to 2,188.57, surpassing the previous multi-year high set Dec. 30. It was the best close for the index since June 18, 2001.
The Standard & Poor’s 500 index also scored a four-year high, rising 5.85 points, or 0.5%, to 1,235.20.
The Dow Jones industrial average added 42.59 points, or 0.4%, to 10,689.15, its highest since March.
As has been the case for much of this year, the most popular indexes didn’t show how strong the underlying market was. A Value Line index of 1,650 stocks jumped 0.9% to a record high. The NYSE composite index also hit a record, rising 0.5%.
For a second straight day, winners topped losers by 2 to 1 on the New York Stock Exchange and on Nasdaq.
The market opened lower as some investors dumped Intel and Yahoo on disappointment over their earnings reports issued late Tuesday. Intel lost $1.27 to $27.44; Yahoo sank $4.33 to $33.40.
General Motors’ report of a large quarterly loss also hurt sentiment. GM lost 25 cents to $36.58.
But buyers soon took control in the broad market.
Although Greenspan indicated that the Fed would continue to raise short-term interest rates, investors saw that as further affirmation of the economy’s strength, analysts said.
“The market seems satisfied that there will be a couple more rate hikes in the offing,” said Gerard Lennon, head of equity trading at Redwood Brokerage in New York. “Staying the present course is going to be bullish for equities.”
Many companies’ earnings reports also point to the economy’s health, analysts said.
“Earnings have been generally above expectations,” said Eric Thorne, who helps oversee $2 billion at Bryn Mawr Trust Co. Investors “don’t want to be left out of a potential rally.”
Sliding oil prices gave the bulls more ammunition. Near-term oil futures in New York fell 74 cents to $56.72 a barrel, the lowest since June 30, as supply concerns eased.
U.S. inventories of crude oil slipped by 900,000 barrels to 320.1 million barrels last week, the government said. Analysts were expecting a decline of at least twice that size.
The bond market also cooperated with Wall Street: Treasury bond yields eased despite Greenspan’s indication that the Fed’s credit-tightening campaign wasn’t over. The 10-year T-note yield ended at 4.16%, down from 4.19% on Tuesday.
Among the day’s market highlights:
* Transportation and commodity-related stocks led the rally, as some investors looked for ways to bet on economic strength.
CNF, owner of the biggest U.S. regional trucker, climbed $3.26 to $51.10 after saying second-quarter operating profit soared 90%. Other transportation issues up sharply included railroad Norfolk Southern, up $1.82 to $35.19, and FedEx, up $2.20 to $84.36.
Among commodity issues, miner Rio Tinto rose $4.66 to $129.67, U.S. Steel gained $1.79 to $40.04 and Vulcan Materials jumped $2.95 to $69.72.
* Amgen’s strong earnings report drove its shares up $10.65 to a record $81.17 and lifted the rest of the sector. OSI Pharmaceuticals jumped $1.35 to $46.80, Genzyme gained $3.41 to $71.75, and Affymetrix was up $1.38 to $58.06.
* Despite Intel’s slide, Teradyne, a maker of semiconductor-testing equipment, rose $2.59 to $16.30 after it said sales would be above expectations in the current quarter. Lam Research, which makes chip production equipment gained $1.45 to $32.55 after reporting earnings that beat analysts’ estimates.
* Among new stock issues, nut producer Diamond Foods of Stockton priced its initial public offering at $17 a share, above the expected range of $14 to $16. The stock will begin trading today on Nasdaq under the ticker symbol DMND.
