Stocks Lifted by Optimism
Stocks were broadly higher Thursday, as optimism over continued strength in the economy trumped concerns that interest rates might rise further.
The Dow Jones industrial average posted a new 4 1/2 -year high, helped by Hewlett-Packard’s strong quarterly earnings. An upbeat home construction report underpinned the market overall.
The blue-chip Dow has taken the lead in the market this month, fueling hopes that big-name stocks may be in a sustained revival after lagging behind smaller shares for most of the last six years.
The Dow rallied 61.71 points, or 0.6%, to 11,120.68, its highest closing level since June 5, 2001.
Broader indexes also rose but remained below their recent multiyear highs. The Standard & Poor’s 500 added 9.38 points, or 0.7%, to 1,289.38, and the technology-dominated Nasdaq composite gained 18.20 points, or 0.8%, to 2,294.63.
Winners topped losers by more than 2 to 1 on the New York Stock Exchange and by 9 to 5 on Nasdaq.
Wall Street has drawn strength the last two days from the congressional testimony of Federal Reserve Chairman Ben S. Bernanke. The Fed chief has emphasized that he believed the economy was in good shape, and that the central bank would be vigilant about inflation.
He told a Senate panel on Thursday that the “economic expansion remains on track.”
That was underscored by the government’s report that new-home construction jumped 14.6% last month, thanks in part to warm weather in much of the country.
The stock market has rallied this week even as shorter-term interest rates have held near five-year highs. Rates have risen in recent weeks as many bond market players have bet that the Fed would lift its key short-term rate at least two more times, from the current 4.5% to at least 5%.
“Clearly, the market has turned for the better here,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. With Bernanke “saying the economy is still powering ahead, this is not a bad environment to be in.”
There also may be relief among equity investors that bond yields didn’t move higher on Bernanke’s testimony.
The two-year Treasury note yield ended Thursday at 4.69%, unchanged from Wednesday. The 10-year T-note was at 4.59%, down from 4.60% on Wednesday.
A rebound in oil prices failed to damp the stock market’s mood. Near-term crude futures gained 81 cents to $58.46 a barrel, but that was only the second increase in nine sessions. Energy prices have been tumbling amid growing U.S. inventories of oil and gasoline.
A big question on Wall Street is whether the Dow can maintain its momentum. The index has risen 2.4% since Jan. 31, and is up 3.8% year to date. By contrast, the S&P; small-stock index is down 0.7% since Jan. 31, although its year-to-date gain of 7.5% still is ahead of the Dow’s.
Among the day’s market highlights:
* Hewlett-Packard rallied $2.35, or 7.4%, to $34.02, a five-year high. The world’s biggest printer maker and the No. 2 personal-computer seller late Wednesday reported a 30% jump in quarterly profit and gave a bullish forecast for the current quarter.
* Among other tech issues, computer data company Network Appliance surged $2.42 to $33.58 after issuing a better-than-expected forecast. And after falling the previous three days, Google rebounded $24.08, or 7%, to $366.46.
* Homebuilders rose after the government said more homes were started in January than in any month since March 1973. An S&P; index of homebuilders jumped 1.6%. D.R. Horton, the No. 1 U.S. homebuilder, added $1.11 to $35.03, Centex was up $1.38 to $70.15 and Ryland gained 97 cents to $69.23.
* Brokerage stocks continued their powerful 2006 rally, with many hitting new highs. Lehman Bros. jumped $1.93 to $147.33 and Merrill Lynch was up $1.43 to $76.73. Some market pros consider strength in brokerage issues to be a bullish sign for the market as a whole.
* J.C. Penney rose $1.22 to $57.85, its highest level since 1998, after reporting a 65% jump in quarterly profit and boosting its dividend 44%. But shares of Target, the second-largest U.S. discount retailer, dropped $1.21 to $54.59 after the company said profit growth this year won’t accelerate.
* Energy stocks rebounded with oil prices. Valero Energy, the biggest U.S. refiner, rose $3.25 to $53.82. Sunoco gained $4.24 to $77.33.
* Goodyear Tire & Rubber dropped 93 cents to $14.51 after the company reported its first quarterly loss since the first period of 2004.
* Expedia, the largest U.S. online-travel agency, slumped $4.43 to $19.82. The company had a fourth-quarter profit, excluding some items, of 20 cents a share on sales of $495 million. Analysts on average expected profit of 26 cents.
