Dow powers upward 72 points
Investors regained some of their swagger Thursday, sending stocks higher and the Dow Jones industrials to another record close after oil prices plunged and a drop in jobless claims indicated the economy wasn’t slowing too quickly.
Thursday’s trading stood in sharp contrast to recent sessions in which investors made small bets as they wrestled with whether stocks eventually would push higher with the same vigor as in 2006. Economic data, such as Thursday’s unemployment figures, and oil prices, which have fallen for four straight days, have drawn the market’s attention as investors try to piece together where Wall Street is headed.
Strength in employment indicates the economy is holding up well as it slows. A number of strong profit forecasts lent support to that notion Thursday. However, investors want the economy to give off some signs of gradual slowdown in order to wring a cut in interest rates from the Federal Reserve.
“The markets had a very strong run in the fourth quarter and we have spent the first week and a half consolidating those gains,” said Steven Goldman, chief market strategist at Weeden & Co. He contended that stocks remained “in a pretty good period,” as with 2006.
The Dow Jones industrial average rose 72.82 points, or 0.59%, to 12,514.98, topping the previous record close, which came Dec. 27, by 4.41 points. It marked the Dow’s 23rd record close since the beginning of October.
Broader stock indicators also rose. The Standard & Poor’s 500 index came within range of its six-year closing high, rising 8.97 points, or 0.63%, to 1,423.82. The technology-laden Nasdaq composite index advanced 25.52 points, or 1.04%, to 2,484.85, its highest since February 2001.
Bond yields rose sharply as the drop in jobless claims pointed to a healthy economy and stirred some concerns that the Fed might not lower rates. Adding to concern, an auction of Treasury Inflation-Protected Securities, or TIPS, drew a lackluster response. The yield on the benchmark 10-year Treasury note rose to 4.73%, from 4.69% on Wednesday.
The decline in jobless claims boosted the dollar against the yen and the euro, which fell to $1.289, from $1.294. But the dollar slipped against the British pound, which was boosted by an unexpected interest rate hike from the Bank of England.
Crude oil futures continued falling, sinking $2.14 to $51.88 a barrel on the New York Mercantile Exchange, its lowest level since May 2005. A pullback by investment funds and an unusually warm winter has unnerved some investors, and in recent days suggested that a period of enormous profits at energy companies might be nearing an end.
“I think low oil prices are good for everybody that doesn’t make oil and the market is starting to realize that not everyone makes oil,” said Scott Merritt, a U.S. equity strategist at JPMorgan Asset Management.
In economic news, the Labor Department said the number of newly laid-off workers seeking unemployment benefits fell to a six-month low last week, dropping by 26,000 to 299,000 on a seasonally adjusted basis. It was the first time jobless claims have moved below 300,000 since the week of July 22.
“You’re seeing the Nasdaq establish some leadership characteristics, which tends to instill confidence,” Goldman said. “If there were some concerns as far as the economy going into a steep slowdown, those stocks probably would languish and be a concern to investors,” he said of stocks traded on the tech-laden Nasdaq.
In other market highlights:
* Drug maker Genentech rose $3.66 to $87.40 after reporting that robust demand for its cancer drugs helped push fourth-quarter profit up 75%.
* Microsoft rose $1.04 to $30.70, its highest since March 2002. JPMorgan analysts said they may raise revenue estimates for Microsoft in the second quarter because of higher-than-expected sales of the software maker’s Xbox 360 consoles and “Gears of War” game software.
* Google climbed $10.26 to $499.72. The company may earn $2.90 a share on revenue of $2.19 billion, up from the previous estimates of $2.81 and $2.15 billion, respectively, Goldman, Sachs & Co. analysts said.
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Bloomberg News contributed to this report.
