Dow, Russell at new highs
Stocks climbed for the third straight day Thursday as an already buoyant Wall Street embraced robust consumer spending figures and largely overcame its disappointment with Google’s profit report. Both the Dow Jones industrial average and the Russell 2,000 index of smaller companies closed at new highs.
The gains followed Wall Street’s best day of the year Wednesday, when it advanced sharply after the Federal Reserve signaled that the economy remained solid and inflation was mostly in check. The central bank’s comments, which followed its decision to leave short-term interest rates unchanged, injected a bit of confidence into an uncertain market.
The first month of the year had revealed investor uneasiness about whether stocks were poised to climb even after the sharp gains of 2006 or the Fed and a drop in corporate profits would bring an unceremonious end to the party.
Economic data continued to influence trading, as the reports have all week. As expected, consumer spending in December showed its biggest increase in five months, rising 0.7%.
“It seems to me the Fed is on hold for the foreseeable future and stocks are taking solace in that,” said Brian Levitt, corporate economist for OppenheimerFunds Inc.
The Dow Jones industrial average advanced 51.99 points, or 0.4%, to 12,673.68. The session saw the blue-chip average’s 27th record close since the start of October, coming in well above the record of 12,621.77 set little more than a week ago, on Jan. 24. A new trading high of 12,682.57 topped a day-old record of 12,657.02.
Broader stock indicators also showed strong gains. The Standard & Poor’s 500 index rose 7.7 points, or 0.5%, to 1,445.94, and the Nasdaq composite index was up 4.45 points, or 0.2%, at 2,468.38.
The Russell 2,000 rose 7.43 points, or 0.9%, to 807.77. The index passed the 800 mark for the first time Wednesday.
Although Thursday’s gains were smaller than those of Wednesday, the sessions resembled the somewhat heady times of the second half of 2006, when investors appeared to be more at ease with back-to-back days of sizable increases. So far this year, run-ups have often been followed by more modest advances or even pullbacks.
Such consolidations, however, are often welcomed because they can signal that investors are making their bets with cool heads, not simply chasing momentum as they bid stocks up.
Bond yields rose, with the benchmark 10-year U.S. Treasury note moving up to 4.84% from 4.81% on Wednesday.
Crude oil futures fell 84 cents to $57.30 a barrel on the New York Mercantile Exchange.
In other economic news, the Labor Department reported the number of newly laid off workers seeking unemployment benefits fell 20,000 last week to 307,000. The figure pushed the four-week average for claims to its lowest level in a year. The reading also bolstered investor confidence about the department’s January unemployment report, which is due today.
Levitt noted that low unemployment coupled with forces such as unseasonably warm weather have given the economy a boost.
“These are things that promote the consumer to go out and spend. I think the key is employment. You have a U.S. consumer that has a job and is making money,” he said, adding that low unemployment is central to a continuation of robust consumer spending and, in turn, further advances on Wall Street.
With consumer spending accounting for more than two-thirds of economic activity, Wall Street tried to look past the Institute for Supply Management’s January reading on the manufacturing sector. The index fell to 49.3 from 51.4 in December, surprising most economists, who had expected a figure above 50. Readings below 50 signal contraction in U.S. manufacturing.
In other market highlights:
* Retailers in the S&P; 500 climbed 1.1% as a group. Circuit City, the second-largest U.S. consumer electronics chain, jumped $1.15, or 5.6%, to $21.56. Department-store company J.C. Penney added $3.53 to $84.77.
* Hewlett-Packard had the steepest loss in the Dow industrials, one day after smaller rival Dell said it replaced its chief executive with founder Michael Dell. Shares of Hewlett-Packard retreated 92 cents to $42.36. Dell dropped 42 cents to $23.80.
* Google fell, despite posting a sharp profit increase after the close of trading Thursday. Investors used to outsize gains weren’t wowed. The stock was off $19.75, or 3.9%, at $481.75.
* Comcast fell $1.43, or 3.2%, to $42.92 after the nation’s largest cable television operator’s fourth-quarter profit came up short of Wall Street’s forecast. However, earnings nearly tripled as revenue rose 30%.
* Boeing’s shares climbed $1.49 to $91.05. The aerospace company reported strong results Wednesday.
* Near-term gold futures rose $5.40 to $657.40 an ounce in New York, the highest level since August. Some analysts said the recent rebound in oil was stoking demand for other commodities as well.
* Overseas, Chinese stock markets stabilized after plunging Wednesday on concerns that recent hefty gains were overdone. The Shanghai composite index closed nearly unchanged and the Shenzhen composite edged up 0.6%.
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Bloomberg News contributed to this report.
