Consumer confidence report boosts stocks
Wall Street posted a healthy advance today as consumer confidence surged to a 22-month high and quelled investor concerns about the economy a day before the Federal Reserve’s decision on interest rates.
The Conference Board’s consumer confidence index rose strongly in June, far outstripping the market’s expectations. Strong consumer confidence is seen as a key factor in the economic recovery, as it means people are more likely to spend.
“The nice thing about this number is that you get all the good news, but it doesn’t necessarily correlate to inflation,” said Michael Palazzi, managing director of equity trading at SG Cowen Securities.
“Yes, inflation will follow and rates will go up, but we have a strong base for the economy, rates are still low, and now we have a lot of confidence.”
The Dow Jones industrial average gained 56.34, or 0.5%, to 10,413.43.
Broader stock indicators were moderately higher. The Standard & Poor’s 500 index rose 2.88, or 0.2%, to 1,136.23, and the Nasdaq composite index was up 15.11, or 0.8%, at 2,034.93.
The Conference Board’s consumer confidence index was pegged at 101.9 for June, up from 93.1 in May and far outstripping the 95 reading Wall Street expected.
That eased some of the nervousness investors were feeling as they awaited the Federal Reserve’s decision on interest rates. The Fed is expected to announce Wednesday at least a 0.25 percentage point increase in the benchmark lending rate, which currently stands at a 43-year low of 1%.
“Even though the market’s up a little bit, and the confidence number is good, I think people are still waiting for the Fed,” said Brian Bruce, director of global investments at PanAgora Asset Management Inc.
“Uncertainty still rules, and once the Fed moves, we can pick a direction and start focusing on earnings and the economy, which are doing really well.”
Nonetheless, the report helped the market overcome disappointing news from Washington Mutual Inc. and Target Corp., which warned that quarterly results would be lower than expected. Investors feared an interest rate hike would harm financial stocks, while Target’s warning, combined with a similar outlook from Wal-Mart Stores Inc., did not bode well for retailers.
Target fell 1.75 to 42.29 after Prudential lowered its estimates of same-store sales growth for the quarter.
The discount retailer has also warned that sales would be below Wall Street expectations.
Washington Mutual skidded 2.84 to 38.47 after the Seattle-based bank lowered its 2004 earnings forecasts, citing the impact of rising interest rates on its mortgage business.
Before the session, McCormick & Co. announced a record 11% increase in quarterly sales, beating Wall Street estimates by 2 cents per share. The spice manufacturer fell 33 cents to 34.07.
A bullish analysis from Lehman Brothers boosted Boeing Co., which gained 30 cents to 50.51.
The brokerage firm increased its earnings outlook for the aircraft manufacturer based on stronger aircraft deliveries.
Online retailer Amazon.com said it is seeking to dissolve its partnership with Toys “R” Us Inc., claiming its contract with the toy retailer has been a “chronic failure.” The two are embroiled in a legal battle and have entered mediation.
Amazon rose 32 cents to 53.71, while Toys “R” Us lost 30 cents to 15.88.
Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume was light.
The Russell 2000 index of smaller companies was up 3.73, or 0.6 percent, at 587.83.
