Housing Data Push Stock Prices Higher
Wall Street advanced for a third straight session Wednesday, although the Dow Jones industrial average fell just short of touching its record high close after a jump in oil prices stifled investors’ enthusiasm.
Falling crude oil prices and an increase in new-home sales had helped investors shrug off a weak durable goods report earlier in the session, putting the Dow 33.74 points away from the closing record of 11,722.98 it set Jan. 14, 2000.
“I think most of the activity is this push to make a close at all-time highs,” Ryan Larson, senior equity trader at Voyageur Asset Management, said of Wednesday’s early movement. He contends Wall Street’s expectation that it would surpass the record drove stocks. Later, investors grew wary, in part by the rise in oil prices.
“I think it was a little bit exhausted,” he said of the idea of a record-breaking day. He said, however, that the market’s gains shouldn’t be ignored and that optimism remained.
The Dow closed up 19.85 points, or 0.2%, at 11,689.24, its second-best close ever. The Dow has gained 181.14 points over the last three sessions.
Broader stock indicators also moved higher. The Standard & Poor’s 500 index rose 0.25 of a point to 1,336.59, and the Nasdaq composite index advanced 2.05 points, or 0.1%, to 2,263.39.
The markets often move higher near the end of a quarter as investors engage in a bit of window dressing and bid up stocks in the hopes of burnishing their quarterly numbers.
The Commerce Department said Wednesday that orders at U.S. factories for large manufactured goods fell for a second straight month in August. It was the first time in more than two years there that has been a consecutive decline. Demand for durable goods dropped 0.5% last month to $209.7 billion.
Some good news came in a report that new-home sales in August climbed 4.1%, their biggest rise in five months. The Commerce Department data raised hopes that a sharp housing industry drop could be easing.
Crude oil rose $1.95 to $62.96 a barrel in New York trading.
Bond prices fell, with the yield on the 10-year Treasury note rising to 4.60% from 4.58% on Tuesday. The surprise rise in August new-home sales raised doubts about the sector’s pace of slowdown, prompting investors to resume profit taking off a three-month rally in bonds.
Wall Street’s advance this week, which followed several weeks of sometimes fitful gains, has been fed by growing signs that the economy is moderating, not headed for a hard landing.
Arthur Hogan, chief market analyst at Jefferies & Co., said he didn’t see the overall rise in stocks as being short-lived given that the recent run-up has been based on multiple events, most notably the Federal Reserve’s decision to again hold interest rates in place and a decline in the price of oil.
“The economy has been doing well and yet the market hadn’t been in step with that because we had the specter of high interest rates and rising energy prices,” Hogan said.
“As long as we can continue to see that economic data stream remain relatively positive I think we can continue” to see gains, he said.
Investors have grown more confident in the strength of the economy since the Federal Reserve has signaled that interest rates are in check for now and as oil prices have fallen more than 20% since July.
In other market highlights:
* Several companies in the Dow reported good news Wednesday, though it wasn’t enough to push the blue-chip average to new highs. McDonald’s rose to a six-year high, advancing 76 cents to $39.82, after saying it would boost its annual dividend 49% to $1 from 67 cents.
Another Dow component, Merck, rose 64 cents to $42.40 after scoring another victory in its legal battle over its painkiller Vioxx. A federal jury determined after a two-week trial that there was insufficient evidence to link Vioxx to a Kentucky man’s heart attack in 2003. Although it was a win for Merck, thousands of other cases are pending.
* Investors soured on Verizon Communications, also part of the Dow, after it said a plan to replace more than half its copper telephone network with fiber optic cable would cost $22.9 billion. The communications company, which fell $1.18, or 3.1%, to $36.78, plans to use the expanded network capacity to sell cable TV and faster Internet connections.
* Gap rose 57 cents to $19.07 after Morgan Stanley upgraded the stock to “overweight” from “underweight,” saying the retailer’s new clothes and marketing plans are gaining traction.
* Red Hat, a distributor of the open source Linux operating system, fell $6.11, or 23.2%, to $20.21 following analyst downgrades to the stock after a disappointing fiscal second quarter.
* Overseas, Japan’s Nikkei stock average closed up 2.51% and Britain’s FTSE 100 closed up 0.96%.
*
Reuters was used in compiling this report.
