Dow has best week in 4 years
Stocks closed mostly higher Friday, sending the Dow Jones industrials’ to their best week in four years after a surprise jump in home sales eased concern that frailty in the housing market would hurt economic growth.
Existing home sales rose by the biggest amount in nearly three years in February amid a sharp increase in sales in the Northeast, the National Assn. of Realtors said. The 3.9% increase was the largest since a similar jump in March 2004; analysts had been expecting a decrease.
Still, the report did have some downbeat aspects -- the median price of a home fell year-over-year for the seventh straight month and inventories rose.
The Federal Reserve this week said an “adjustment” in the housing sector was continuing, offering some relief for investors left unnerved by the woes among sub-prime mortgage lenders. Wall Street had grown concerned that an implosion among sub-prime lenders, which make loans to people with poor credit, could spill over into other parts of the economy and derail already slowing economic growth.
“People are realizing the housing market is bottoming and is not going to cause a recession in 2007,” said Noman Ali, U.S. equities portfolio manager at MFC Global Investment Management. “The consumer is really the main driving force of the economy and the consumer remains strong.”
The Dow rose 19.87 points, or 0.16%, to 12,481.01. The blue-chip index rose for five straight sessions, picking up 370.60 for its biggest weekly point gain since March 2003; that translated to a 3.06% rise for the week.
Broader stock indicators ended mixed. The Standard & Poor’s 500 index advanced 1.57 points, or 0.11%, to 1,436.11, and the Nasdaq composite index fell 2.81 points, or 0.11%, to 2,448.93.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange.
For the week, the S&P; 500 rose 3.54% and the Nasdaq gained 4.52%.
Bond yields rose following release of the housing data. The yield on the benchmark 10-year Treasury note climbed to 4.61%, from 4.58% Thursday.
Crude oil futures rose 59 cents to $62.28 in New York trading.
The week’s gains seemed to take Wall Street by surprise. Investors had expected that the Fed would leave short-term interest rates at 5.25% but changes in the wording of the central bank’s policy statement seemed to offer something for everyone.
Stocks rallied after the central bank didn’t refer to the possibility of “additional firming” of rates as it had in January. Instead, policymakers said “future policy adjustments” would depend on inflation and growth. Despite the more neutral language about the possibility of a rate cut, the Fed said it remained vigilant about the threat of inflation.
With Wednesday’s decision, the Fed has left short-term interest rates -- the rate banks charge each other for overnight loans -- unchanged for six meetings after a string of 17 straight increases that began in 2004.
Examining the week’s trading, Ed Hyland, global investment specialist for JPMorgan Private Bank, said it was a “good sign” that the market had not given back its gains.
“I think it’s just that the market is continuing to digest the rally that it had,” he said, although he noted that Wednesday’s advance, which included a 159-point jump in the Dow industrials, was perhaps overwrought.
In other market highlights:
* Germany’s DaimlerChrysler jumped to a 52-week high amid speculation that a Canadian auto supplier, along with a private equity company, planned to make a bid for the company’s struggling U.S. Chrysler division. DaimlerChrysler increased $4.76, or 6.1%, to $82.36.
General Motors rose $1.67, or 5.5%, to $31.99.
* Amgen fell $2.45, or 4.1%, to $58.02 after the Thousand Oaks-based company halted a trial of colon cancer drug Vectibix. In the trial, the product hastened the development of colon cancer when used in combination with another drug, Avastin.
* Label maker Avery Dennison of Pasadena agreed to acquire Paxar, a maker of tags, labels and apparel identification products, for about $1.34 billion. Avery Dennison rose 88 cents to $66.43, while Paxar surged $4.52, or 18.8%, to $28.55.
