Good Mood on Economy Lifts Major Stock Indexes
Stocks rose, sending the Standard & Poor’s 500 index to a two-month high, on optimism that Federal Reserve comments and government reports this week will show the economy is expanding without inflation.
The market built on its gain of last week, which was the biggest weekly advance in six months.
“People are beginning to realize, ‘You know what, maybe this economy does have some legs to it,’ and companies continue to benefit,” said Hans Olsen, chief investment officer at Bingham Legg Advisers in Boston.
“Where in the world do you continue to find good growth these days? Increasingly, it’s here in the U.S.”
The S&P; 500 added 4.58 points, or 0.4%, to 1,193.86, the highest since March 15. The Dow Jones industrial average rose 51.65 points, or 0.5%, to 10,523.56.
The technology-heavy Nasdaq composite, which has led the market’s rebound in recent weeks, gained 10.23 points, or 0.5%, to 2,056.65 for its seventh straight advance, the longest such rally since November.
Winners topped losers by 7 to 4 on the New York Stock Exchange, although trading volume was muted.
Another drop in Treasury bond yields aided the market’s advance. The yield on the benchmark 10-year T-note fell to a three-month low of 4.06% from 4.12% on Friday.
Some analysts say the stock market is predicting healthy economic growth ahead, while the bond market is predicting a slowdown. Others say the markets are in sync, expecting decent growth with low inflation.
The Fed today will release the minutes of its last meeting, which could give new clues about the central bank’s views on the economy and inflation.
The corporate junk bond market, hit by heavy selling in recent weeks, also improved on Monday as bond prices rose and yields fell. The yield on an index of 100 junk issues tracked by KDP Investment Advisors fell to 7.88% from 7.93% on Friday.
The continuing good mood on Wall Street helped stocks overcome a rebound in oil prices: A barrel of light crude rose 51 cents to settle at $49.16 on the New York Mercantile Exchange.
“I think this is a great show of resiliency in the marketplace,” said Michael Palazzi, managing director of equity trading at SG Cowen Securities. “I don’t think that people are sitting there thinking that this is the start of a real bullish run higher, but to get up to these levels and hold here is a good sign.”
In other market highlights:
* In the technology sector, investors welcomed analysts’ upgrades and Apple Computer’s reported talks to use Intel chips in its computers. An Apple move to Intel’s chips would make Macs far less expensive -- a major hurdle in Apple’s battle with less expensive PCs already using Intel processors and Microsoft’s operating system.
The possible deal, reported in the Wall Street Journal, could spell trouble for IBM, Apple’s current supplier.
Intel rose 15 cents to $26.50, and Apple gained $2.21 to $39.76. IBM added 10 cents to $76.51.
* Energy shares and other commodity-related stocks rebounded from recent losses. Murphy Oil gained $1.41 to $92.17, nickel miner Inco rose $1.17 to $37.48 and Potash was up $1.26 to $87.94.
* Many industrial equipment stocks also advanced on optimism about the economy. 3M jumped $1.47 to $78.53 and United Technologies soared $2.49 to $107.64, a record high.
Paccar, the maker of Peterbilt and Kenworth trucks, increased $2.18 to $71.10. Barron’s said the shares might climb to more than $100, without giving a time frame.
* Shares of home builders and real estate investment trusts underpinned the broad market. Among builders, KB Home gained $1.48 to $64.70 and Toll Bros. rose $1.69 to $86.17. A Bloomberg News index of 148 REIT stocks inched up 0.1% to a record closing high.
* Pixar surged $2.31 to $52.99. The computer animation film studio run by Steven Jobs may increase its production schedule to more than one film per year starting in 2009, Prudential Equity Group analyst Katherine Styponias wrote in a note.
* Campbell Soup advanced 48 cents to $30.82, a 52-week high. The company said quarterly earnings were 35 cents a share on higher prices and lower promotional spending. Analysts had expected 33 cents.
