Investors stay confident of economic recovery, though Fed report says it hasn't begun.
By Associated Press
Published June 12, 2003
NEW YORK - Wall Street extended its rally Wednesday as investors shook off a warning from the technology sector and sent stocks higher on optimism about the economy. The Dow Jones industrials climbed above the 9,100 mark for the first time in 11 months.
"The market momentum here is quite strong," said Steven Goldman, chief market strategist, Weeden & Co. in Greenwich, Conn. "When we have a sustainable advance, market horizons tend to expand, with investors willing to look further into the future and shake off bad news."
The Dow closed up 128.33, or 1.4 percent, at 9,183.22, having advanced in seven of the last eight sessions for a net gain of 343 points. It was the highest level seen since July 8, 2002, when the blue-chips finished at 9,274.90.
The broader market also rose. The Nasdaq composite index rose 18.35, or 1.1 percent, to 1,646.02. Earlier in the day, the tech-focused index fell as much as 15.45 points. The Standard & Poor's 500 index gained 12.64, or 1.3 percent, to 997.48. It was the highest finish since June 20, 2002, when the index stood at 1,006.29.
"What's interesting in my opinion is that we've seen pieces of bad news that the markets could have responded to negatively, but unlike the last couple of years, the market isn't responding," said Subodh Kumar, chief investment strategist for CIBC World Markets.
"When a company issued a warning or there was an accounting scandal, it used to tar the market, but now investors are just ascribing it to the individual company and not to the market as a whole," he said.
Stocks have surged in recent weeks on upbeat first-quarter earnings and hopes of an economic rebound by year's end. Information in the Federal Reserve's "Beige Book," a collection of data and anecdotes gathered through June 2 by the Fed's regional banks, helped kick the markets higher Wednesday - even though the survey suggested only that the economy appeared to be on the verge of recovery.
The gist of the survey was in line with Fed chairman Alan Greenspan's assessment of the economy when he told an international monetary conference last week that the U.S. economy had "stabilized" while a period of stronger growth has "not yet begun." Vice chairman Roger Ferguson said there is no evidence that improving financial conditions have resulted in stronger growth.
"The unwinding of war-related concerns appears to have provided some lift to business and consumer confidence, but most reports suggested that the effect has not been dramatic," the survey said. No district suggested its economy had deteriorated since the last survey April 23.
Fed policy makers will use today's survey as a reference when they meet June 24-25 to review the benchmark overnight bank lending rate. And no matter whether a recovery has begun, Wall Street's biggest bond-trading firms are unanimous in predicting a cut of at least a quarter-point in the rate, which at 1.25 percent is already the lowest since 1961.
"I believe we're in a bull market - one that can carry the averages sustainably higher," said Goldman, citing in part low interest rates and the end of the war. "I think we can see a 45 percent to 50 percent move (from Oct. 9) over the next six months, with gains that are broad-based." Since hitting a five-year low of 7,286.27 on Oct. 9, 2002, the Dow has risen about 25 percent.
Texas Instruments fell $1.53 to $18.86 after the chip maker lowered its second-quarter outlook, citing in part sluggish sales due to SARS fears in Asia. But IBM rose $2.26 to $83.97 after Merrill Lynch added the company to its highly recommended list of stocks.
Lennar surged $5.70, or 8.2 percent, to $75.45 after the home builder said its fiscal second-quarter income rose 51 percent, handily beating analysts' expectations.
But Freddie Mac fell $1.50 to $50 after federal prosecutors initiated a criminal probe into possible misconduct at the nation's second-largest home-mortgage company. (Story, 2E).
Eli Lilly advanced $2.96 to $63.19 after the drug company raised its second-quarter earnings outlook to the upper end of its previous forecast; it also backed its full-year estimates.
Advancing issues outnumbered decliners 5 to 2 on the New York Stock Exchange. Consolidated volume was somewhat heavy at 1.94 billion shares, compared with 1.68 billion traded Tuesday.
The Russell 2000 index, a barometer of smaller company stocks, rose 4.54, or 1 percent, to 455.50.
- Information from Bloomberg News Service was used in this story.
