Streak continues for stocks
Wall Street traded mostly higher Tuesday, briefly pushing the Dow Jones industrials into record territory after a rise in home construction and a mild reading on consumer inflation encouraged investors to buy.
The technology-dominated Nasdaq composite index and the Russell 2,000 index of smaller companies slipped, showing that most of the stock market’s gains were isolated in larger companies that are more impervious to economic stumbles.
Many investors were heartened by the Commerce Department’s report that March housing starts rose 0.8% -- a feeble rise compared with February’s 7.6% advance, but much better than the drop investors expected. Building permits also rose. Stocks have had many tumultuous weeks this year due to worries about the financial troubles of the sub-prime lending sector spilling into the already sluggish housing market.
Giving investors some additional relief, the Labor Department’s core consumer price index rose 0.1% in March, less than expected, which alleviated some anxiety about the Federal Reserve’s need to raise interest rates to curb costs. The overall consumer price index, which takes into account energy and food, rose 0.6% in March -- the largest increase in 11 months -- and was in line with expectations.
Some investors doubt that Wall Street’s optimism will last.
“I think this is sort of a weak relief rally,” said Ed Peters, chief investment officer at PanAgora Asset Management Inc. in Boston. “It’s nice that the core level of inflation came in lower than expected, but the headline rate is what people live on.... There are still problems out there.”
The Dow rose 52.58 points, or 0.4%, to 12,773.04. Gains in Coca-Cola and Johnson & Johnson, which reported earnings earlier in the day that exceeded expectations, gave the blue-chip index its 13th rise out of the last 14 sessions.
Broader stock indicators were mixed. The Standard & Poor’s 500 index rose 3.01 points, or 0.2%, to 1,471.48, while the Nasdaq composite index fell 1.38 points, or 0.1%, to 2,516.95.
Advancing issues outnumbered decliners by about 3-to-2 on the New York Stock Exchange, where consolidated volume came to 2.89 billion shares from 2.83 billion Monday.
The Russell 2,000 index of smaller companies slipped 2.48 points, or 0.3%, to 828.96. The index reached an intraday high of 831.71 during the session.
Bonds rose following the inflation data, which could give the Fed more room to lower rates. Also heightening that possibility, the Federal Reserve reported Tuesday that March utility production dropped 7%, offsetting a rise in factory production.
The yield on the benchmark 10-year Treasury note fell to 4.68% from 4.74%.
Crude oil prices fell 51 cents to $63.10 a barrel on the New York Mercantile Exchange.
Gold prices slipped. The dollar neared all-time lows versus the euro, and dropped to a 15-year low against the British pound. The dollar’s weakness has been brought on by the U.S. economy and interest rates rising less than in other countries.
The stock market has been showing strength heading into the first-quarter earnings season. Nearly half the component companies of the Dow Jones industrial average release earnings this week. Analysts expect the reports to show corporate growth is slowing, but this week, many companies’ financial results have surpassed forecasts.
In other market highlights:
* Homebuilders climbed after the data on starts and building permits bolstered expectations the worst housing slump in 15 years might be easing.
D.R. Horton, the second-biggest U.S. homebuilder by sales, increased 77 cents to $22.45. KB Home, the fifth-largest, rose $1.69 to $43.04.
* Coca-Cola, the world’s largest drink maker and one of the 30 Dow components, said Tuesday that its first-quarter profit climbed 14%. The rise beat analyst expectations, thanks to a double-digit increase in worldwide sales despite its troubled North America segment. Coca-Cola rose $1.30, or 2.6%, to $51.57.
U.S. companies can benefit from markets abroad, despite slowing U.S. growth, market participants say.
“The foreign economies are now large enough and strong enough that they’ll be able to help us,” said Joe Balestrino, a portfolio manager at Federated Investors Inc.
* Another Dow component, healthcare products maker Johnson & Johnson, reported a 22% profit drop due to a charge for an acquisition that more than offset record sales. But the results beat forecasts and the stock rose $1.53, or 2.4%, to $64.55.
* The financial sector posted mixed earnings, but shares fell throughout the sector. Mellon Financial’s profit rose and exceeded expectations, as did those of Wells Fargo. But TD Ameritrade Holding’s profit dropped and missed predictions, and so did U.S. Bancorp’s.
Mellon was unchanged at $44.14; Wells Fargo fell 26 cents to $35.25; TD Ameritrade dropped $1.56, or 9.3%, to $15.31; and U.S. Bancorp slipped 34 cents to $34.56.
* Moody’s, whose founder created credit ratings, climbed $2.68 to $68.40. Citigroup Investment Research raised its first-quarter earnings estimate for the company to 60 cents a share from 57 cents because an increase in dollar-denominated debt sales would fuel demand for ratings.
Bloomberg News was used in compiling this report.
