Positive economic reports give US stocks big boost
Wall Street barrelled higher yesterday lifting the Dow Jones industrials more than 250 points, as investors celebrated a string of positive economic data.
The rally brought the market’s major indexes back to levels not seen since the summer.
Trading was light in the pre-holiday session, but the gains were big with the Nasdaq composite index also rising sharply, picking up more than 40 points.
The sharp advance defied expectations that stocks would pull back after nearly two months of rallies on Wall Street and that traders would not want to commit to stocks ahead of the holiday weekend.
Investors first got a lift from a jump in consumer spending – the news helped the market shake off its disappointment from the previous session when it was irked by a weaker-than-expected reading on consumer sentiment.
Investors were also pleased by a spike in orders to US factories for big-ticket items and an increase in manufacturing activity in the Midwest. Analysts said the trio of positive reports assuaged investors’ concerns that the economy could slip back into recession.
“The numbers suggest the economy is indeed resilient and the consumer has stayed on track where spending is concerned,” said Kevin Caron, market strategist, Ryan, Beck & Co., LLC.
The Dow closed up 255.26, or 2.9%, at 8,931.68. The Dow more than recouped the 172.98 lost in the previous session and was on its way to an eighth straight winning week.
The last time the Dow closed higher was August 22 when it stood at 9,053.60.
In another sign of the market’s growing momentum, the Dow enjoyed its best day before Thanksgiving ever, surpassing the 2.5% gain seen in 1957, according to Markethistory.com, a financial research Web site.
The broader market – up for six of the past seven weeks – was also higher Wednesday. The Nasdaq soared 43.55, or 3%, to 1,487.98. The last time the Nasdaq finished higher was June 19 when it was at 1,496.83.
The Standard & Poor’s 500 index advanced 25.56, or 2.8%, to 938.87. The last time the S&P finished higher was Aug. 26 when it stood at 947.95.
“Today, the market couldn’t hold back. It had to respond to the batch of positive economic news,” said Peter Cardillo, president and chief strategist of Global Partner Securities Inc.
Trading was light ahead of tomorrow’s Thanksgiving holiday, when the market will be closed. The market will be open for a half day on Friday.
Today’s gains followed a report from the Commerce Department saying consumers ratcheted up their spending by 0.4% in October. It was the biggest increase in three months, and an improvement over September’s 0.4% dip.
The market’s upward momentum intensified following reports on durable goods and manufacturing activity in the Midwest. The Commerce Department reported that orders for durable goods – items expected to last at least three year – rose 2.8% in October, exceeding economists’ expectations for a 1.8% gain.
And, the Purchasing Management Association of Chicago reported that its index of area manufacturing activity rose to 54.3 in November from 45.9 in October. The reading was better than the 48.8% analysts had anticipated. A reading above 50 indicates expansion in activity.
Analysts said the reports built a strong case for a resilient economy, rather than one that was prone to reverting back to recession.
“What is most telling in the composite picture is what the numbers aren’t saying. The numbers are not indicative of an economy that is rolling over for the double dip (recession) scenario. This is very important because this has been a debate for last year,” Caron said.
Auto and appliance makers got a lift from the durable goods report. DaimlerChrysler climbed 1.73 dollars to 35.50 dollars, while Maytag rose 1.28 dollars to 30.23 dollars.
Drug maker Eli Lilly surged five dollars to 69 dollars on good news of its own - government approval of two drugs on Tuesday and an upgrade to “buy” from Standard & Poor’s.
Technology also enjoyed solid gains. For nearly two months, the tech sector has fared the best in Wall Street’s rallies, a sign that investors are growing more confident about the economy’s progress.
Microsoft rose 1.30 dollars to 58.20 dollars and Cisco Systems climbed 38 cents to 14.83 dollars.
Advancing issues outnumbered decliners 5 to 2 on the New York Stock Exchange. Trading volume was light.
The Russell 2000 index, which tracks smaller company stocks, rose 11.90, or 3%, to 410.22.
