Stocks resume upward move
Wall Street on Tuesday extended its rebound from the big summer slump after slightly weaker-than-expected economic data raised hopes for an interest rate cut by the Federal Reserve.
The market also got a boost as investors bought technology stocks viewed as bargains after being battered during last month’s sell-off.
The Institute for Supply Management said the manufacturing sector expanded more slowly in August than in July, and the Commerce Department said construction activity fell 0.4% in July. Stock investors were pleased that the snapshots were neither so weak as to suggest the economy was falling apart nor so strong as to make the Fed less inclined to cut its benchmark federal funds rate Sept. 18.
“We haven’t had anything happen to change that outlook,” said Arthur Hogan, chief market analyst at Jefferies & Co. “Everything still points to a Fed that could lower rates.”
The Dow Jones industrial average rose 91.12 points, or 0.7%, to 13,448.86. The blue-chip index is 3.9% below its July 19 record close of 14,000.41 but is up 4.7% from its Aug. 16 low of 12,845.78.
The biggest gainer among the 30 Dow companies was General Motors, which rose $1.18, or 3.8%, to $31.92 after reporting a surprising increase in August sales.
Broader stock indicators also advanced. The Standard & Poor’s 500 index added 15.43 points, or 1%, to 1,489.42, and the technology-dominated Nasdaq composite index surged 33.88 points, or 1.3%, to 2,630.24.
The Russell 2,000 index of smaller companies rose 7.83 points, or 1%, to 800.69.
Advancing issues outnumbered decliners by about 12 to 5 on the New York Stock Exchange. Volume remained light.
Treasury bond yields moved little. The 10-year Treasury note’s yield finished at 4.55%, unchanged from late Friday. The dollar was mixed against other major currencies, while gold prices rose.
Technology stocks have led the market’s rebound from its mid-August lows. The Nasdaq 100 index, dominated by large tech issues, jumped 1.6% on Tuesday and has surged 9.4% since Aug. 16. By contrast, the S&P; 500 is up 5.9% since mid-August.
This year the Nasdaq 100 is up 15%, compared with a 5% gain for the S&P; 500.
Among major tech shares, Cisco Systems rose 40 cents, or 1.3%, to $32.32, its highest closing level in more than six years. Chip giant Intel gained 43 cents, or 1.7%, to $26.18, Apple surged $5.68, or 4.1%, to $144.16, Google was up $9.90, or 1.9%, to $525.15, and Yahoo rose $1.24, or 5.5%, to $23.97.
“Technology stocks are the cheapest they’ve looked in 10 years, on an earnings multiple basis,” Hogan said, noting that the tech sector was particularly pummeled during the summer’s stock plunge.
In other market highlights:
* Stocks in the energy sector surged as oil futures jumped $1.04 to $75.08 a barrel in New York on speculation that the hurricane season could intensify and the Organization of the Petroleum Exporting Countries might decide not to raise production when it meets next week.
* Utility shares climbed. Exelon, the largest U.S. utility owner by market value, advanced $2.84, or 4%, to $73.51. The company said it planned to buy back as much as $1.25 billion of stock.
* In after-hours trading, Guess fell $3.87, or 7.2%, to $49.53. The Los Angeles-based apparel maker issued a fiscal 2008 profit forecast putting it toward the low end of analysts’ estimates.
* Home Depot sank $1.95, or 5.1%, to $36.36. The home-improvement retailer said it expected to pay $37 a share in a $10.7-billion share buyback. That’s less than half the amount of stock the company previously planned to buy back, and the price per share is at the low end of the $37-to-$42 range previously announced.
* NovaStar Financial fell $1.33, or 16%, to $7.16. The mortgage company said it is tightening lending, laid off more than 30% of its workforce and pulled a $101-million stock offering.
* Discount wireless phone service provider MetroPCS Communications offered to acquire rival Leap Wireless International for $5.12 billion in stock. Leap soared $10.97, or 15%, to $83.47, and MetroPCS rose $1.36, or 5%, to $28.65.
* ASE Test soared $2.59, or 22%, to $14.35. The Taiwanese semiconductor testing service company said ASE Inc., which owns a majority of the company, would take the company private by buying the shares it doesn’t own in a transaction valued at $784 million.
* Overseas, key stock indexes fell 0.6% in Japan and climbed 1% in Britain, 1% in Germany and 0.4% in France.
