Stocks surge on Wall Street
Wall Street shot higher today on better-than-expected manufacturing data, but gave up much of its gains after the Dow Jones industrials surpassed the 9,000 mark for the first time since December.
Analysts said investors were upbeat about an economic recovery, but some were cashing in profits on concerns that the market’s recent surge might have come too fast, too soon.
“The economic activity is slow to improve but the market is optimistic,” said John C. Forelli, portfolio manager for Independence Investment LLC in Boston. “For the market, the glass is half-full – as opposed to three-quarters empty as it had been for a while.”
The Dow closed up 47.55, or 0.5%, at 8,897.81, following a weekly advance of 2.9% last week. It was the best level seen since November 27, 2002, when the Dow closed at 8,931.68.
Earlier in the afternoon, the blue chips rose as much as 153 points to hit 9,003.27. The last time the Dow rose above 9,000 during the day was December 2, 2002 – the last time the blue chips closed above 9,000 was August 22, 2002, when they stood at 9,053.64.
The broader market finished mixed. The Nasdaq composite index fell 5.16, or 0.3%, to 1,590.75, after gaining 5.7% last week. Earlier in the day, the tech-focused index rose as much as 24 points.
The Standard & Poor’s 500 index rose 3.41, or 0.4%, to 967.00, having risen 3.3% last week. The index closed above its September 21, 2001, low of 965.80 for the first time since July 8, 2002.
The Institute for Supply Management reported that its manufacturing index was 49.4% last month, up from 45.4 in April. A reading below 50 means manufacturing activity is slowing still, the figure was better than the 48.5 that economists were expecting.
However, the Commerce Department said spending on construction projects dipped by 0.3% in April from March to a seasonally adjusted annual rate of 862.6 billion US dollars. It was the third straight month that spending fell and was weaker than the 0.2 increase analysts were expecting.
Stocks have surged in recent weeks on a wave of better-than-expected earnings and positive economic data. Analysts say investors are more confident about an economic rebound by year’s end, although the market is still vulnerable to sharp declines on profit-taking.
“There’s an undercurrent of improving economic activity,” said A.C. Moore, chief investment strategist for Dunvegan Associates. “It’s hard to see on a month-to-month basis, but if you squint your eyes you can see it. Consumer confidence is returning ... that spells for a better market performance as we look at a very low interest rate.”
Forelli agreed, but added that it would be hard for Wall Street to maintain its upward momentum after several weeks of strong gains.
“At some point, we’re going to have to see very strong economic and earnings news to keep the market moving forward,” he said. “We’ll have to see more optimism coming from companies in second-quarter earnings reports than we did at the end of the first quarter.”
ImClone surged 5 dollars, or 17.5%, to 33.50 dollars after the biotech company’s cancer drug Erbitux showed effectiveness in clinical trials.
Genentech climbed 4.12 dollars, or 6.6%, to 66.73 dollars after researchers said the biotech company’s experimental drug Avastin modestly lengthened survival for colon cancer patients in clinical trials.
AMR rose 61 cents, or 9.6%, to 6.95 dollars after Goldman Sachs raised its stock rating on the parent of American Airlines to “outperform” from “in-line.”
Decliners included Dow components Johnson & Johnson, which fell 1.13 dollars to 53.22 dollars, and Intel, which lost 44 cents to 20.38 dollars.
Advancing issues outnumbered decliners 9 to 5 on the New York Stock Exchange. Volume was heavy.
The Russell 2000 index, a barometer of smaller company stocks, rose 1.63, or 0.4%, to 442.63.
