Stock rally extends to a third day
Wall Street extended its February rally Thursday, growing confident that interest rates will hold steady even as Federal Reserve Chairman Ben S. Bernanke tempered his forecast of slowly cooling growth and inflation with a reminder that price pressures remained a concern.
The Dow Jones industrial average stretched its three-day advance to more than 200 points, the first such jump since Aug. 15-17 last year, and had its second straight record close. The rally, triggered Tuesday by signs of an uptick in takeovers, was given new life Thursday by a report that the world’s two largest beer makers, InBev and Anheuser-Busch, were considering joining forces.
The bustle of takeover talk coupled with Bernanke’s testimony to Congress helped send stocks soaring. Bernanke’s comments Thursday were similar to a day earlier, but he added that inflation could once again pick up, which reminded investors that a rate increase wasn’t out of the question. That note of caution limited the market’s climb.
However, the prospect of a rate hike looked pretty dim Thursday after the release of several economic reports. The data showed a big jump in unemployment claims last week, a huge drop in industrial output in January because of large cutbacks and layoffs in the auto industry, and weaker-than-expected manufacturing in the Philadelphia region.
“The Fed is still data-driven, so we will be looking at the data in the ensuing months,” said Jim Herrick, manager of equity trading at Baird & Co. “There’s a strong possibility we’ll continue this uptrend.”
Also boosting the market were a stock buyback by Caterpillar, an analyst upgrade of chip maker Qualcomm and Boeing’s finalizing an order from United Parcel Service for 27 cargo planes.
The Dow Jones industrial average climbed 23.15 points, or 0.2%, to a record close of 12,765.01.
Broader stock indicators were also higher. The Standard & Poor’s 500 index rose 1.51 points, or 0.1%, to 1,456.81, and the technology-laden Nasdaq composite index increased 8.72 points, or 0.4%, to 2,497.10.
Bond yields fell, with the benchmark 10-year Treasury note finishing at 4.71%, down from 4.74% on Wednesday.
The dollar fell against most major currencies Thursday after a U.S. government report showed net capital inflow tumbling in December, suggesting foreign securities are attracting investors.
The dollar bought 119.33 yen, down from 120.79 yen on Wednesday. The euro rose to $1.315 from $1.312.
The Federal Reserve reported Thursday that output at U.S. factories, mines and utilities was down 0.5% in January, the largest amount in 17 months, and the Labor Department reported that the four-week moving average of the number of newly laid-off workers rose to its highest level in nine weeks.
Also Thursday, a survey by the Philadelphia Fed showed near-flat manufacturing activity in that region and its first decline in employment in more than three years. The report could help make the case for at least stable interest rates, but it did not have a big effect on bond trading.
Oil prices fell a penny to settle at $57.99 a barrel in New York, stemming a tumble sparked a day earlier by a smaller-than-expected decrease in U.S. heating oil inventories.
Financial results from oil service provider Baker Hughes that missed analysts’ expectations pressured some companies in the energy sector. Baker Hughes fell $6.75 to $65.19.
Overall, stocks performed well, especially as hopes for an uptick in takeover activity were reinvigorated when a Sao Paulo paper reported that InBev had held preliminary merger talks with Anheuser-Busch.
Anheuser-Busch rose $1.52 to $51.75.
Also buoying blue-chip stocks were announcements by Caterpillar that it planned to repurchase $7.5 billion in stock in the next five years and by Boeing that it had finalized an order worth $3.6 billion from UPS.
Caterpillar rose $1.46 to $67.62, Boeing rose $1.77 to $91.71 and UPS fell 54 cents to $74.48.
An analyst upgrade of Qualcomm cheered investors in tech stocks, offsetting some discouraging news that Internet phone company Vonage Holdings posted a fourth-quarter loss and that biotech company Biogen Idec’s fourth-quarter profit came in below analysts’ expectations.
Qualcomm rose $1.65 to $41.31, Vonage fell 54 cents to $5.30 and Biogen fell $2.49, to $48.
Wall Street seems to be firmly in an uptrend, said Chris Hensen, senior portfolio manager of U.S. equities for MFC Global Investment Management. Overall corporate earnings for the fourth-quarter appeared to reflect a slowing of growth but with average percentage increases in the double digits for the 14th consecutive quarter.
In Japan, the Nikkei stock average rose 0.8% to its highest level in more than six years.
