Rally Resumes on Wall St.
Wall Street resumed its new year’s rally Thursday, shaking off stock trading troubles in Japan, higher oil prices and a terrorism warning purported to be from Al Qaeda leader Osama bin Laden.
In a sign of the breadth of the market’s advance, two key indexes of smaller U.S. shares hit record highs. Semiconductor, brokerage and railroad shares also were among the day’s leaders, boosted by upbeat corporate earnings reports.
In other trading, gold soared nearly $15 an ounce to a fresh 25-year high after the terrorism threat. Treasury bond yields rose after the government said new claims for unemployment benefits dropped last week to the lowest since April 2000, a sign of economic strength.
On Wall Street, the Dow Jones industrial average added 25.85 points, or 0.2%, to 10,880.71, its first gain after losing ground in the previous four sessions.
As was true for much of last year, the blue-chip Dow understated the strength of the broader market.
The tech-dominated Nasdaq composite index surged 22.17 points, or 1%, to 2,301.81. The Standard & Poor’s 500 gained 7.11 points, or 0.6%, to 1,285.04.
Winners topped losers by more than 2 to 1 on the New York Stock Exchange and on Nasdaq, in heavy trading.
Smaller stocks, which have outpaced blue-chip issues for six years, remain in the lead this year: The Russell 2,000 index of smaller shares jumped 11.16 points, or 1.6%, to a record 714.94.
An S&P; small-stock index rose 1.4% to a record 369.77.
The market lost ground early in the week on worries about fourth-quarter profit, after disappointing reports from companies such as Alcoa and Dupont.
On Wednesday, stocks worldwide declined on concerns about Japan’s market. Tokyo shares were slammed by heavy selling Tuesday and Wednesday after prosecutors raided the offices of high-flying Internet company Livedoor on suspicion of securities fraud. The Japanese market was further spooked by the Tokyo Stock Exchange’s inability to handle a flood of sell orders.
On Wall Street, Japan’s woes and weaker-than-expected earnings reports from Intel and Yahoo threatened to spark a steep decline Wednesday. But the U.S. market held up relatively well. The Dow lost 0.4% and Nasdaq was off 1%.
Buyers returned in force Thursday, encouraged in part by earnings reports from companies including semiconductor leader Advanced Micro Devices, railroad Union Pacific and Merrill Lynch.
“People are starting to see that earnings aren’t as bad as they initially thought,” said Dan Whitney, a trader at Fifth Third Asset Management in Cincinnati.
Advanced Micro shares soared $2.98 to $37.13 after the company said earnings hit a record $95.6 million in the fourth quarter and gave an optimistic outlook for the current quarter.
Many other chip stocks also rallied. Aliso Viejo-based Qlogic rose $2.39 to $38.45 after it beat earnings forecasts. The so-called SOX index of major chip shares rose 3.1% and is up 11.5% this year, despite Intel, which lost 20 cents to $22.40 on Thursday and is down 10% this year.
Tech stocks in general have led the new year’s rally on optimism about 2006 growth prospects.
The market seemed untroubled by a new audiotape believed to be from Bin Laden, threatening terrorist attacks in the U.S. Investors also looked past a jump in oil prices: Near-term crude futures rose $1.10 to $66.83 a barrel in New York, the highest since Sept. 19, amid fears of supply interruptions from Nigeria and Iran.
Gold prices did respond to the terrorism threat, traders said: Near-term gold futures in New York shot up $14.70, or 2.7%, to $558.40 an ounce, a 25-year high. The price had tumbled $9.70 an ounce Wednesday.
In the bond market, the 10-year Treasury note yield rose to 4.37% from 4.33% on the surprisingly small employment-benefits claims data.
Among the day’s highlights:
* Union Pacific led rail shares higher after reporting that fourth-quarter earnings tripled from a year earlier. Union Pacific surged $5.02 to $85.02, Norfolk Southern gained $1.60 to $44.60 and CSX was up $1.54 to $52.36.
* Merrill Lynch reported a 25% jump in fourth-quarter earnings, lifting its shares $2.44 to $72.05. Among other brokerage firms, Lehman Bros. rose $4.12 to $137.49 and UBS rallied $2.09 to $104.90.
* In the Internet sector, EBay gained $2.33 to $46.77 despite giving a relatively cautious business forecast as it reported fourth-quarter results late Wednesday. Google continued to slide, falling $8.46 to $436.45.
* Schlumberger rocketed $5.76 to a record $114.87. The oilfield services giant said it would split its stock 2 for 1 and raise its dividend 19%.
* Lion’s Gate Entertainment jumped 54 cents to $9.10 amid takeover rumors.
* On the downside, home builders’ shares pulled back. KB Home lost 89 cents to $77.88 and Centex fell 89 cents to $74.78.
