U.S. stock indexes emerge from trading range of last two months
Major U.S. stock indexes on Friday broke out of the trading range where they’ve been stuck for two months, as a surprisingly strong retail sales report and gangbuster earnings from Google Inc. helped fuel a broad rally.
The Dow Jones industrial average and the Nasdaq composite index turned positive for 2011, with both indexes now up 0.6% year to date.
The Dow gained 166.36 points, or 1.4%, to 11,644.49, its highest close since Aug. 3, when the market was in the midst of a terrifying plunge driven by Europe’s deepening debt crisis and fear of another global recession.
The market’s latest rally has been underpinned by hopes that both of those worries are receding. European stocks have risen for three straight weeks as the continent’s leaders have taken new steps to buttress their financial system. This week, Slovakia became the final country to approve expansion of the Eurozone rescue fund for struggling member countries.
Meanwhile, U.S. economic data have mostly pointed to slow growth, but not a new recession. On Friday, the government said retail sales rose 1.1% in September, a much better gain than economists had expected.
“You have people saying, ‘It’s not a double dip,’” said Phil Roth, veteran technical market analyst at Miller Tabak & Co. in New York.
Internet search giant Google’s earnings report late Thursday also stoked optimism. The company said net profit jumped 26% in the third quarter.
Google shares zoomed $32.69, or 5.8%, to $591.68, the highest since Aug. 3. Lifted by Google and a new high in Apple Inc. stock, the tech-dominated Nasdaq index added 1.8% to 2,667.85.
For market chart watchers, the rally was significant because the Dow, the Nasdaq and the Standard & Poor’s 500 all pushed through the tops of their recent trading ranges.
Since the dive in early August, the market has mostly traded in a fairly narrow channel. The S&P, for example, has mostly bounced between 1,100 and 1,220 since Aug. 8. Many experts believe much of the action in the market has been little more than short-term players trading back and forth with each other.
On Friday the S&P rose 20.92 points, or 1.7%, to 1,224.58, above the previous trading-range closing high of 1,218 on Aug. 31.
Bulls have been hoping to see major indexes top their recent highs, which could convince more investors and traders that the market is in a sustainable rebound from the summer plunge.
