Stocks Stage a Modest Rally
Stocks extended their fourth-quarter advance with a modest rally Tuesday as oil prices fell to eight-month lows.
A jump in Treasury bond yields may have tempered Wall Street’s enthusiasm.
In other trading, the dollar climbed, benefiting from global jitters over North Korea’s apparent nuclear bomb test.
The Dow Jones industrial average set its fourth record close in two weeks, adding 9.36 points, or nearly 0.1%, to 11,867.17. That topped the previous record of 11,866.69 set Thursday.
Among broader indexes, the Standard & Poor’s 500 inched up 2.76 points, or 0.2%, to 1,353.42, the highest close since 2001. The Nasdaq composite was up 3.66 points, or 0.2%, to 2,315.43, a five-month high.
Rising stocks outnumbered losers by about 5 to 4 on the New York Stock Exchange.
The bull market that began Oct. 10, 2002, entered its fifth year Tuesday.
Another slump in oil prices took near-term crude futures in New York down $1.44 to $58.52 a barrel, the lowest since Feb. 16, amid expectations that supplies would continue to climb.
Falling energy prices have helped underpin the stock market’s rally of recent months. But analysts now expect investors’ focus to turn to third-quarter earnings reports.
In the first report by a major company, Alcoa said after regular trading ended that third-quarter profit jumped 86%. But that was shy of analysts’ expectations, and the aluminum giant’s shares sank to $26.60 after hours. The stock had risen 30 cents to $28.29 in regular trading.
“It will be interesting to see what happens with earnings,” said Rick Campagna, a portfolio manager at Provident Investment Counsel in Pasadena. “I’ve got to believe the economy is slowing and that there will be tempering of guidance for the fourth quarter.”
Wall Street analysts are optimistic about third-quarter earnings for blue-chip companies. Earnings projections tracked by Reuters Estimates peg average year-over-year growth at 14% for the S&P; 500 companies.
Some analysts worry that a rebound in bond yields could give the stock market indigestion. The benchmark 10-year Treasury note yield jumped to a three-week high of 4.75% on Tuesday from 4.70% on Friday. Bond markets were closed Monday for Columbus Day.
The 10-year T-note has surged from 4.54% on Sept. 25 as some investors and traders have become less confident that the Federal Reserve will cut short-term interest rates in 2007.
Investors sold bonds Tuesday after Dallas Federal Reserve Bank President Richard Fisher told a London investment seminar that inflation was too high and that the Fed would do everything it could to get it under control. That boosted expectations that the Fed would hold its key short-term rate at the current 5.25% indefinitely.
Rising bond yields may have helped the dollar, which was already benefiting as some global investors sought a haven on concerns about North Korea. The buck jumped to a 10-month high of 119.76 yen from 119.12 on Monday. The euro sank to $1.254 from $1.261.
In Asian trading, South Korea’s main stock index rose 0.7% after falling 2.4% on Monday, when it was pulled down by news on the North Korean bomb test.
Among Tuesday’s market highlights:
* The Dow got a boost from American Express, which jumped $1.14 to a record $57.66. Also in the Dow, McDonald’s rose 27 cents to $40.84, its highest in more than six years.
* Energy stocks rallied despite oil’s slide. Marathon Oil surged $3.04 to $79.49, Valero Energy rose 62 cents to $50.45 and Apache was up $1.29 to $64.54.
* Home builders also moved up after J.P. Morgan Securities upgraded several of the companies, including Toll Bros., which gained $1.48 to $30.29, and Standard Pacific, which jumped $1.25 to $26.62.
Builders’ shares have been slowly working their way higher since July after diving in the first half of this year. An S&P; index of 16 major builders’ stocks has risen 23% since mid-July but still is down 25% year to date.
* Google lost $2.35 to $426.65 as investors reacted to the company’s decision late Monday to buy YouTube for $1.65 billion in stock. Google shares are up 2.8% this year, trailing the 10.7% gain in the Dow index.
* Anheuser-Busch rallied 99 cents to $47.98 after the Times of London said billionaire investor Edward Lampert might bid $56 a share for the company. Neither Anheuser-Busch nor Lampert would comment.
* Legg Mason rose $3.23 to $105.31 in regular trading, then plunged to $95.75 after hours. The money management giant estimated that earnings in its most recent fiscal quarter were 96 cents to $1.02 a share, well below analysts’ average estimate of $1.16. The company said that revenue was lower than expected and that expenses were higher than expected.
