Stocks Zoom on Upbeat Outlook
That big stock market sell-off a week ago? Never mind.
Wall Street roared ahead Friday, lifting some broad share indexes to all-time highs, as a powerful rally overseas and upbeat profit reports from U.S. companies bolstered investors’ confidence about stocks in 2006.
The Dow Jones industrial average surged 97.74 points, or 0.9%, to 10,907.21, the fourth advance in five days and enough to recoup the last of the losses from the 213-point dive the index suffered a week ago Friday.
Investors looked past the government’s weaker-than-expected estimate of gross domestic product growth in the fourth quarter after many analysts said the report understated the strength of business conditions.
The economy appears “to be slowing from 70 miles an hour to 60 miles an hour -- not to 40 or 50,” said Tom Hanson, portfolio manager at Pacific Global Investment Management Co. in Glendale.
The bullish case has been reinforced in recent days by strong quarterly earnings reports from companies including machinery giant Caterpillar Inc., Microsoft Corp., Procter & Gamble Co. and chip maker Broadcom Corp.
Those reports, and others, have offset the gloom triggered a week ago by disappointing results from General Electric Co. and Citigroup Inc., and by rising crude oil prices.
The Dow’s 2% slump Jan. 20 was its biggest percentage drop since May 2003.
On Friday, by contrast, stocks zoomed even as oil rose again, with near-term crude futures in New York adding $1.50 to $67.76 a barrel. The price still was down 59 cents for the week.
The rally Friday was broad-based and pushed the New York Stock Exchange composite index up 0.6% to a record high of 8,096.14, eclipsing the previous peak of 8,063.51 set Jan. 11.
Other indexes reaching all-time highs included the Russell 2,000 small-stock index and a Standard & Poor’s index of mid-size stocks.
The blue-chip S&P; 500 rose 9.89 points, or 0.8%, to 1,283.72. The technology-heavy Nasdaq composite was up 21.23 points, or 0.9%, to 2,304.23.
The S&P; 500, the Nasdaq index and the Dow remain below the multi-year highs they reached Jan. 11. The Dow closed at 11,043.44 on that day, 136 points above Friday’s close.
Despite high oil prices and concern about the outlook for U.S. consumer spending, some analysts say the strength of the market’s rebound this week shows investors by and large are taking a positive view of the economy’s potential in 2006, and thus of prospects for corporate earnings.
U.S. investors’ confidence is getting a boost from rising optimism overseas, some analysts say. “I feel like we are following the enthusiasm of overseas markets,” said Art Hogan, chief market analyst at brokerage Jefferies & Co. in Boston.
In Japan on Friday, the Nikkei-225 index soared 569.66 points, or 3.6%, to a 5 1/2 -year high of 16,460.68. Investors poured back into the Japanese market this week after prices slumped the previous week, hurt in part by a plunge in shares of a popular Internet company.
Japan’s economy has been showing increasing signs of emerging from its long slump.
“If they are coming out of their problems, they could drive global growth for five or six years,” said Jim Paulsen, investment strategist at Wells Capital Management in Minneapolis.
Germany’s main share index also zoomed Friday, gaining 98.51 points, or 1.8%, to a five-year high of 5,647.42 and leading a broad advance in Europe. A German business sentiment index this week showed confidence at a five-year high.
In the U.S., the Treasury bond market Friday seemed to endorse the idea that the economy would remain on a growth track. Despite the weak gross domestic product report, bond yields were largely steady. The 10-year T-note ended at 4.51%, unchanged from Thursday and up from 4.35% a week ago. If bond investors expected a continuing economic slowdown they would be more likely to push yields down, analysts say.
