Surging Dow closes in on 13,000 mark
Wall Street is firing on nearly all cylinders in its latest run for the record books: Investors are snapping up stocks across a broad range of industry sectors as optimism about the global economy reasserts itself.
That was evident Friday, when the Dow Jones industrial average surged 153.35 points, or 1.2%, to a record 12,961.98.
Also hitting all-time highs were the Dow transportation and utility indexes, the New York Stock Exchange composite and a Standard & Poor’s index of mid-size stocks.
Rising stocks topped losers by more than 3 to 1 on the NYSE.
The market’s powerful spring rally is beefing up mutual fund balances in investors’ 401(k) retirement savings plans.
The average domestic stock fund was up a modest 2.1% in the first quarter, but the year-to-date gain now is 5.9%, according to Morningstar Inc. The average foreign stock fund is up 8.1%.
The rally Friday was fueled in part by upbeat first-quarter earnings reports from companies including Google Inc., American Express Co., Xerox Corp. and Caterpillar Inc.
Earnings growth expectations were low coming into the quarter, reflecting concerns about the slowing U.S. economy. Those subdued expectations have made it easier for companies to pleasantly surprise investors, analysts say.
Of 249 companies that had reported first-quarter results as of Thursday, 61% beat estimates, 13% matched estimates and 26% came up short, according to earnings tracker Zacks Investment Research in Chicago.
What’s more, for many U.S. multinational companies, “international sales have more than offset slowness here” in the first quarter, said Larry Adam, investment strategist at brokerage Deutsche Bank Alex. Brown in Baltimore.
Caterpillar, which makes earthmovers and other industrial equipment, said Friday that its machinery sales in the quarter totaled $6.5 billion, up 6% from a year earlier. Although North American sales were down 13%, sales jumped 19% in Latin America and 23% in Asia.
Caterpillar earned $1.23 a share in the quarter, up from $1.20 a year earlier. The company also raised its full-year earnings projection to as much as $5.80 a share from a previous top-of-range projection of $5.70.
The company’s stock, one of the 30 issues in the Dow average, soared $3.20 to $71.82.
Stronger-than-expected profit results are helping to boost confidence in the global economic outlook after a brief period of doubt in late February and early March that triggered a sharp pullback in stock prices worldwide.
Also, the U.S. housing slump has failed to significantly crimp consumer spending or employment, analysts note. That has damped worries that the U.S. could fall into recession this year and has turned the mood on Wall Street from one of fear in early March back to the sunny side that prevailed in January.
“There is no fear in the market again,” said Howard Silverblatt, a senior analyst at Standard & Poor’s in New York.
The S&P; 500 index rose 13.62 points, or 0.9%, to 1,484.35 on Friday, a 6 1/2 -year high. The index is within 3% of its record closing high of 1,527.46 set in March 2000.
The Nasdaq composite index, dominated by technology issues, rallied 21.04 points, or 0.8%, to 2,526.39, a six-year high. Google rocketed $10.83 to $482.48 after reporting late Thursday that first-quarter earnings jumped 69% from a year earlier.
For the week, the Dow gained 2.8%, the S&P; 500 rose 2.2% and the Nasdaq index was up 1.4%.
The breadth of the market’s advance this month is evident in the performance of the 10 major industry groups in the S&P; 500. All 10 have posted gains since March 31, led by healthcare stocks, which have surged 7.4% on average.
Big-name drug stocks, which have struggled in recent years as the companies have faced rising competitive pressures, have come alive in recent weeks. Merck, which on Thursday reported better-than-expected quarterly profit, rose $1.34 to $51.49 on Friday and is up 17% since the end of March.
The continuing bull run in stocks worldwide also shows that many institutional and individual investors still have ample amounts of cash to put to work, analysts say. In Wall Street parlance, cash is “liquidity.”
“There’s liquidity all over the place,” Adam said. That includes capital in the hands of private-equity investment firms that are leading a wave of corporate takeover activity.
And many companies, such as Caterpillar, continue to use cash reserves to buy back their own shares, providing another source of demand in the market.
Some analysts say the stock market also is winning because many investors have little interest in bonds, which pay relatively low interest rates, and because housing has lost its allure.
“Stock prices are going higher because stocks are still more attractive than bonds and real estate,” said money manager Louis Navellier of Navellier & Associates in Reno.
Among Friday’s market highlights:
* The bulls were running worldwide. New highs were set in Mexico and Brazil. Stocks hit a six-year high in France.
In China, where the Shanghai composite stock index tumbled 4.5% on Thursday on concerns that China’s central bank might raise interest rates to curb red-hot economic growth, investors poured back into the market Friday. The Shanghai index rebounded 3.9%.
* Oil stocks were strong as near-term crude futures in New York rebounded $1.55 to $63.38 a barrel. Exxon Mobil rose $2.30 to $79.76, a record closing high.
* Treasury bond yields were flat. The 10-year T-note ended at 4.67%, the same as on Thursday.
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Broad advance
Healthcare, energy and financial-services stocks are leading the stock market’s broad-based rally this month.
Gains in S&P; 500-index stock sectors since March 31
*--* Healthcare 7.4% Energy 5.2 Financials 4.4 Tech 4.3 Utilities 4.1 Consumer 4.0 big ticket Consumer 3.8 staples Industrials 3.4 Materials 3.0 Telecom 1.6
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Source: Bloomberg News
