Investors regained some of their recent swagger Thursday, sending stocks higher and the Dow Jones industrials to another record close after and a indicated the economy wasn’t slowing too quickly.
Thursday’s trading stood in sharp contrast to recent sessions in which investors made small bets as they wrestled with whether stocks would eventually push higher with the same vigor as in 2006. Economic data, such as Thursday’s unemployment figures, and oil prices, which have fallen for four straight days, have drawn the market’s attention as investors try to piece together where Wall Street is headed.
Strength in employment indicates the economy is holding up well as it slows. However, investors want the economy to give off some signs of gradual slowdown in order to wring a cut in interest rates from the Federal Reserve.
“The markets had a very strong run in the fourth quarter and we have spent the first week and a half consolidating those gains,” said Steven Goldman, chief market strategist at Weeden & Co. He contends stocks remain “in a pretty good period,” as with 2006.
According to preliminary calculations, the Dow Jones industrial average rose 72.82, or 0.59 percent, to 12,514.98, topping the previous record close of by 4.01 points.
Broader stock indicators also rose. The Standard & Poor’s 500 index rose 8.97, or 0.63 percent, to 1,423.82, and the Nasdaq composite index advanced 25.52, or 1.04 percent, to 2,484.85.
Bonds fell sharply as the drop in jobless claims pointed to a healthy economy and stirred some concerns that the Fed might not lower rates. Adding to concern, an auction of Treasury Inflation-Protected Securities, or TIPS, drew a lackluster response. The yield on the benchmark 10-year Treasury note rose to 4.74 percent from 4.69 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude, which has already declined 15 percent in 2007, fell to its lowest level since May 2005, settling down $2.14 to $51.88 a barrel on the New York Mercantile Exchange. A pullback by investment funds and an unusually warm winter has unnerved some investors, and in recent days suggested that a period of enormous profits at energy companies might be nearing an end.
“I think low oil prices are good for everybody that doesn’t make oil and the market is starting to realize that not everyone makes oil,” said Scott Merritt, a U.S. equity strategist at JPMorgan Asset Management.
In economic news, the Labor Department said the number of newly laid off workers seeking unemployment benefits fell to a six-month low last week, dropping by 26,000 to 299,000 on a seasonally adjusted basis. It was the first time jobless claims have moved below 300,000 since the week of July 22.
“You’re seeing the Nasdaq establish some leadership characteristics, which tends to instill confidence,” Goldman said. “If there were some concerns as far as the economy going into a steep slowdown, those stocks probably would languish and be a concern to investors,” he said of stocks traded on the tech-laden Nasdaq.
Comments from a handful of companies on profits added to the upbeat mood on Wall Street and suggested earnings remained strong in the final quarter of 2006. As many on Wall Street expect profits will prove more modest in 2007 amid a slowing economy, some investors have been holding their breath to see how companies’ bottom lines would hold up in the fourth quarter.
Drug maker Genentech Inc. rose $3.66, or 4.4 percent, to $87.40 after reporting that robust demand for its cancer drugs helped push fourth-quarter profits up 75 percent.
Quest Software Inc., which makes application and database-management software, rose 31 cents, or 2.1 percent, to $15.30 after an analyst said the company likely had a strong fourth quarter.
C-Cor Inc., which makes network distribution equipment for cable TV operators, rose 77 cents, or 6.5 percent, to $12.56 after predicting it will beat its fiscal second-quarter forecast.
Wabtec Corp. rose $1.50, or 5.1 percent, to $30.70 after the maker of locomotive and railcar parts issued its 2007 forecasts and said its earnings and revenue expectations should meet its expectations.
Investors weren’t pleased with all of the earnings news. Amdocs Ltd., a maker of customer-service software, fell $3.63, or 9.2 percent, to $35.70 after lowering its revenue forecast for 2007. The company cited lower-than-expected activity among its customers in the telecommunications industry.
Airlines stocks, which have been buoyed as oil prices have receded and brightened the profit picture for carriers, continued their advance Thursday. In particular, AirTran Holdings Inc. rose 48 cents, or 4 percent, to $12.40 after it sweetened its cash-and-stock offer for rival Midwest Air Group Inc., increasing its bid by about 18 percent. AirTran tried to appeal to Midwest shareholders. Midwest, which has rebuffed AirTran’s advances, rose 50 cents, or 3.9 percent, to $13.40.
The Russell 2000 index of smaller companies rose 9.58, or 1.23 percent, to 788.45.
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.67 billion shares compared with 1.57 billion traded Wednesday.
Overseas, Japan’s Nikkei stock average closed down 0.62 percent. Britain’s FTSE 100 closed up 1.13 percent after being down following a surprise hike in interest rates by the Bank of England. Germany’s DAX index closed up 1.84 percent, and France’s CAC-40 was up 1.96 percent.