Dow hits a high as stocks rally
Wall Street resumed its fourth-quarter rally Thursday, pushing the Dow Jones industrial average to its first close above 12,400 after a series of strong company earnings and a drop in unemployment claims revived investors’ confidence in the economy.
The market, which stalled earlier this week on interest rate and economic concerns, was reinvigorated by robust quarterly profits from Bear Stearns, Lehman Bros. Holdings and Costco Wholesale.
Wall Street was also boosted by the Labor Department’s report that the number of Americans filing for unemployment benefits plunged for a second straight week. The data suggested that the U.S. economy wouldn’t cool as quickly as some investors feared.
“As far as I can tell, consumers keep spending as long as unemployment is low,” said Ed Peters, chief investment officer at PanAgora Asset Management.
The Dow rose 99.26 points, or 0.8%, to a new closing record of 12,416.76. The index, whose last record close was 12,342.56 on Nov. 17, is up 16% this year.
The Standard & Poor’s 500 index climbed 12.28, or 0.9%, to a six-year record of 1,425.49. The technology-laden Nasdaq composite index rose 21.44, or 0.9%, to 2,453.85.
Yields of benchmark U.S. Treasury notes hit three-week highs after data reinforced the view that growth was strong enough to keep the Federal Reserve from cutting interest rates early next year.
The New York Federal Reserve’s Empire State manufacturing index for December came in at 23.1, beating expectations for a reading of 18. The 10-year T-note rose to 4.60% from 4.58% on Wednesday.
Crude oil for January soared $1.14 to settle at $62.51 a barrel in New York trading after OPEC said it would cut production.
The stock market had been moving cautiously over the last week, inching up and then pulling back after the Fed left interest rates steady Tuesday and offered no hints that it might start lowering them. But Thursday’s positive corporate and economic news sparked a resumption of stock buying, extending the Dow’s upward climb.
“We’re in that Santa Claus rally time, and there’s nothing to stop it today,” said Arthur Hogan, chief market analyst at Jefferies & Co. He said the market seemed to be looking past rising fuel prices.
Although stocks have bounced back, the economic picture remains mixed, analysts said.
“There have been a few good earnings coming out, in addition to energy stocks rising because of oil,” Peters said. “But it’s also against the backdrop of bond yields rising and energy prices going up, which is negative for everybody.... The market seems to be largely ignoring the very real possibility of another interest rate hike instead of a cut.”
In other market highlights:
* The tech sector got a boost from Ciena’s robust profit and a forecast by Advanced Micro Devices of cost savings from its acquisition of ATI Technologies. Ciena, which makes equipment for fiber optic communication networks, rose $2.87 to $27.83. Advanced Micro gained $2.54 to $22.71.
* Investors were also cheered by Costco, which said its profit in the latest quarter rose 10%. The nation’s largest wholesale club operator rose 97 cents to $54.11.
* Bear Stearns climbed $4.07 to $159.96 on its strong financial results. Lehman Bros. slipped 29 cents to $76.08 as investors were slightly disappointed that the firm did not produce record fourth-quarter profit, unlike rivals Bear Stearns and Goldman Sachs. Goldman, which reported earnings Tuesday, added $1.82 on Thursday, to $200.13.
* Citigroup rose 79 cents to $53.11 after the largest U.S. financial institution’s chief executive unveiled plans to improve profitability in 2007. Diversified manufacturer Honeywell rose 83 cents to $42.69 after saying it expected a 5% rise in sales and double-digit earnings growth next year.
* Higher energy prices were a boon to oil companies’ stocks, pushing Chevron up $1.57 to $75.97 and ConocoPhillips up $2.07 to $73.07.
* Amid a big week for new stock issues, Genesis Lease, an aircraft leasing firm, rose 65 cents to $23.65 on its first day of trading. NewStar Financial, a lender to mid-size companies, rose as high as $19.50 but ended at $17.71, up from its initial offering price of $17. Cal Dive International, which provides diving services to energy companies, got a poor reception, falling 65 cents to $12.35 on its first trading day.
Pasadena-based Guidance Software, which went public Wednesday at $11.50 and jumped to $15.18 in that session, added $1.81 to $16.99 on Thursday.
New stocks priced Thursday included ethanol producer U.S. BioEnergy, which sold shares at $14 each. They will begin trading today under the symbol USBE. Tech firm Isilon Systems (ISLN) sold shares at $13 each. Altra Holdings (AIMC), which makes industrial power transmission systems, priced its shares at $13.50.
