Signs of a strong start to the holiday shopping season and a better-than-expected report on U.S. manufacturing growth drove stocks solidly higher Monday, lifting the broader market to its highest level in about 18 months.
Stocks advanced at Monday’s open amid indications that the all-important holiday shopping season got off to a fast start over the Thanksgiving weekend, traditionally one of the year’s busiest shopping periods.
The National Retail Federation, an industry trade group, said a survey found nearly three-quarters of U.S. consumers went shopping last weekend and projected a 5.7 percent increase in holiday sales this year over last.
Separately, Dow component Wal-Mart said sales at its U.S. stores hit a record on the Friday after Thanksgiving, rising 6.3 percent from the same period in 2002 and hitting a single-day record of 1.52 billion.
But some analysts questioned the strength of Wal-Mart’s data, saying the growth rate was slower than during the same period in 2002 and noting that square-footage at the firm’s stores has grown over the past year.
Shares of Wal-Mart, often considered a proxy for all retailers, fell 2.1 percent to $54.50 in Monday’s session. Larry Wachtel, market analyst at Prudential Securities, said Wall Street had overly high expectations for the holiday season and investors were grabbing profits after a solid advance in retail stocks so far this year.
Stocks added to their early gains about 30 minutes into the trading session after the Institute for Supply Management (ISM) said its index of U.S. manufacturing sector activity rose to a 20-year high of 62.8 in November (a number above 50 indicates expansion).
Separately, the government said U.S. construction spending rose a hefty 0.9 percent in October.
The data impressed economists. “Businesses are increasingly convinced this recovery can be sustained, and it won’t just be a flash in the pan,” said Richard DeKaser, chief economist at National City.
The Dow Jones industrial average climbed steadily throughout the day. It dipped briefly mid-session, but closed at its high for the day and at its highest level in 18 months, up 116.59 points, or 1.2 percent, at 9,899.05.
The Standard & Poor’s 500-stock index, a broad market gauge, finished the day up 11.92 points, or 1.1 percent, at 1,070.12 and at its highest closing level since May 28, 2002. The Nasdaq Composite index, which tracks the technology sector, finished the day up 29.56 points, or 1.5 percent, at 1,989.82 — a 22-month high.
The market’s advance was broad-based, but trading volume was light. “It’s another light-volume levitation day, but it’s certainly doing a good job,” said Arthur Cashin, head of floor trading at UBS Financial Services, on CNBC.
Boeing CEO Phil Condit resigns
Shares of aerospace and defense giant Boeing, a Dow 30 member, fell 1 percent to $38.02 following news earlier in the day that Phil Condit, the firm’s chairman and chief executive, has resigned. The news had little effect on the overall market.
According to a Boeing statement, Condit’s resignation was accepted after the firm’s board decided “a new structure for the leadership of the company” was needed. Harry Stonecipher took over as president and CEO, effective immediately.
Condit’s resignation coincided with news that Qantas Airways, Australia’s biggest airline and a key Boeing customer, plans to buy 23 new planes worth about $1.15 billion from Boeing rival Airbus for a new low-cost carrier, Jetstar, which will launch in May.
More tales of executive troubles came from Walt Disney, another Dow component and one of the nation’s largest media giants.
Disney vice chairman Roy E. Disney stepped down from the firm’s board of directors and called on chairman and chief executive Michael Eisner to resign. Later Monday anther board member, Stanley P. Gold, resigned his post and echoed calls for Eisner’s departure.
DuPont, also a Dow component, saw its share price rise 3 percent to $42.70 after reporting plans to cut annual costs by $900 million by 2005, partly through job cuts, and aims to increase revenue by 6 percent as the chemicals maker grapples with high raw material costs and the impending sale of a unit.
Semiconductor stocks also helped lift the stock market, with the Philadelphia Stock Exchange’s semiconductor index rising modestly after an industry survey showed October global sales of semiconductors showed their strongest month-on-month growth since March 2002.
Hartford to buy CNA group unit
Insurance company CNA Financial said before Monday’s open that it has agreed to sell its group benefits business to Hartford Financial Services Group for about $500 million.
A rise in overseas markets also buoyed Wall Street.
European market averages ended higher after news reports said the United States is ready to climb down on steel tariffs, lifting Europe’s “old economy” stocks. And oil prices fell on news that the OPEC oil ministers expect to hold production quotas steady at Thursday’s ministerial meeting.
Earlier, Japan’s benchmark Nikkei 225-share index closed at a three-week high, up 3 percent, reacting positively to signs that the government is finally intent on sorting out the nation’s banking problems.
The strong ISM data raised hopes for more solid economic data later this week when reports on November unemployment, motor-vehicle sales, October factory orders and third-quarter productivity are due. Data on the massive U.S. service sector are also expected later this week.
Trading volumes were light last week, when the stock market was shuttered for Thanksgiving on Thursday and closed early on Friday. But major market gauges scored hefty gains for the week.
The dollar was mixed, trading at 1.1975 dollars to the euro and 109.38 yen to the dollar, compared with 1.1991 dollars and 109.61 yen late Friday in New York.
Reuters contributed to this story.