Broad Rally Pushes Dow Over 11,000
The Dow Jones index roared back above 11,000 on Tuesday, surging 136 points on the strength of better-than-expected January retail sales figures and a drop in crude oil prices below $60 a barrel.
The blue-chip index closed within reach of its 4 1/2 -year high of 11,043 set Jan. 11, the last time it closed above the 11,000 mark.
The broad rally began early, after the Commerce Department said retail sales soared 2.3% last month, beating economists’ consensus forecast of a 0.9% climb and posting the biggest rise since May 2004. The report soothed fears that the U.S. economy could be headed for a slowdown, strategists said.
“That was a breath of relief for the market,” said Bruce Zaro, chief technical strategist at Delta Global Advisors in Plymouth, Mass. “The figure was much stronger than expected, taking one worry off the board.”
Consumer spending has kept the economy chugging despite growing fears on Wall Street in recent months that a cooler housing market could have widespread effects.
“Apparently the consumer is enjoying watching all the bad news in the world on his new flat-panel TV,” said Phil Dow, managing director of equity strategy at brokerage RBC Dain Rauscher in Minneapolis.
In active trading, the Dow Jones industrial average zoomed 136.07 points, or 1.3%, to 11,028.39. The broader Standard & Poor’s 500 index rallied 12.67 points, or 1%, to 1,275.53, and the technology-heavy Nasdaq composite index zipped 22.36 points, or 1%, to 2,262.17.
Gainers swamped losers by more than 2 to 1 on the New York Stock Exchange and about 2 to 1 on Nasdaq.
The rally more than made up for Monday’s sell-off, when the Dow dropped 26 points and the Nasdaq lost 22.
RBC’s Dow was surprised by the strength of Tuesday’s upswing. What’s more, he had expected many buyers to wait and see what new Federal Reserve Chairman Ben S. Bernanke has to say about inflation and interest rates before placing new bets on the stock market.
The robust economic data could make it harder for Bernanke to signal an imminent end to interest rate hikes when he gives his first congressional testimony today.
Volume was slow Monday, though the snowstorm in the Northeast might have kept some traders away.
The Fed has lifted its key short-term rate to 4.5% through a series of 14 hikes, and most economists expect another increase when policymakers meet March 28.
Treasury yields rose as traders took the retail report as a sign that two more rate moves could be coming. The yield on the benchmark 10-year T-note rose to 4.61% from 4.58%.
Mild winter weather and expectations of rising inventories sent crude oil futures tumbling $1.67 to $59.57 a barrel on the New York Mercantile Exchange, marking the third straight decline and the lowest close since Dec. 27. Unleaded gasoline for March delivery plunged more than 3% to $1.385 a gallon on the Nymex.
Heating oil and natural gas also fell as traders predicted that a government inventory report today would show a marked increase in stockpiles of oil, fuels and natural gas.
Analysts said the inventory status seemed to override concerns about possible supply disruptions in politically sensitive countries such as Iran, Nigeria and Venezuela -- worries that had pushed oil prices to the brink of $70 per barrel twice in January.
Even with the recent deluge of snow in the Northeast, “the weather’s been really, really mild,” said Eric Bolling, an oil trader in New York. For that reason, he said, “inventories have been high straight through the whole winter, and building.”
Prices are coming down now, Bolling added, because “for some reason, people aren’t concerned about Iran anymore.”
Iran, a major worldwide supplier of oil, was the catalyst for the commodity’s rise in January after its leaders announced plans to resume uranium enrichment work. The United States and other countries fear that Iran will build a nuclear weapon, and the International Atomic Energy Agency has reported the country’s activities to the United Nations Security Council.
Over the last year, experts have observed that some of the high price of oil could be chalked up to “worry premiums” tied to possible production disruptions caused by war or political upheaval.
“We’ve had all these premiums, and it seems like the market just decided that it’s time to get rid of them,” said Peter Beutel, president of Cameron Hanover Inc. “And this market doesn’t dillydally. If it decides to go lower, it’s going to go lower with a vengeance.”
In equity highlights:
* Retailers rallied on sales data. Home Depot gained $1.43 to $41.13, Federated Department Stores added $1.70 to $70.17 and Wal-Mart Stores climbed 94 cents to $46.45.
* Optimism about the economy boosted industrial stocks, including vehicle parts maker Eaton, which advanced $2.45 to $69.10, and Caterpillar, which rose $1.60 to $70.22.
* Weaker energy names included Schlumberger, which slipped $3.03 to $114.87 and Amerada Hess, which dropped $2.35 to $137.44. Chevron dipped 45 cents to $55.72.
* Google continued its slide, losing $2.38 to $343.32 and bringing the Internet giant’s year-to-date loss to 17.2%.
* Among Southland companies, Agoura Hills-based Digital Theater Systems soared $2.22 to $18.74 on strong earnings, but Malibu toy maker Jakks Pacific fell $1.47 to $22.63 on lower sales and profit in the last quarter.
