Wall Street extended its recovery from last week’s big plunge, rising Thursday after several stable sessions helped buttress investor sentiment and allay some concerns about the economy.
Thursday’s advance helped investors speed past lackluster retail sales figures and focus on more promising comments about March sales. Investors also grew more confident following gains in markets in Europe and Asia. The dollar was mixed against major currencies and fought its way higher against the yen, easing some concern about whether global liquidity would tighten.
Investors eager for signals about the health of the economy bet on rising fortunes for U.S. businesses a day ahead of the Labor Department’s much-anticipated February employment report. Strong employment is seen as crucial on Wall Street because robust consumer spending has kept the economy charging ahead in recent years. Larger concerns about the economy figured heavily in last week’s sell-off.
“I think we got a little bit too negative too fast,” said Brian Levitt, corporate economist at OppenheimerFunds Inc., referring to the Feb. 27 global sell-off that sent the major U.S. indexes down more than 3 percent. “They failed to see the broader picture that there still is fairly good underlying strength in the economy.”
The Dow Jones industrial average rose more than 100 points before pulling back amid rumors a subprime lender would declare bankruptcy. It closed up 68 points, or 0.6 percent, while the broader Standard & Poor’s 500-stock index added 10 points, or 0.7 percent. The Nasdaq composite index advanced 13 points, or 0.6 percent.
Bonds fell as stocks advanced; the yield on the benchmark 10-year Treasury note rose to 4.51 percent from 4.50 percent late Wednesday. Gold prices rose. Light, sweet crude fell 18 cents to $61.64 per barrel on the New York Mercantile Exchange.
The focus on broader market sentiment and the impending February employment report overshadowed word from the Labor Department that the number of newly laid-off workers seeking unemployment benefits fell last week to the lowest level in a month.
Unlike last week, news from overseas provided little headwind to U.S. stocks. On Thursday, the European Central Bank raised interest rates by a quarter point, as expected, and the Bank of England left rates unchanged. Turbulence in stock markets worldwide last week gave a sense that Wall Street, London and financial capitals in Asia were essentially one big trading floor — stocks seemed to move in tandem over concerns about whether the global economy would begin to sputter.
Investors should remain vigilant, Levitt says.
“I think we are still going to see some volatility. Investors need to focus on keeping the risks in their portfolio in check. There are good opportunities around the world but certainly it is a good time to think about quality.”
The major indexes indeed showed some volatility after rumors emerged Thursday afternoon of a bankruptcy filing by subprime lender New Century Financial Corp. The stock, which dropped below a 52-week low of $3.94 to as low as $3.37 before rebounding somewhat, fell 95 cents, or 18 percent, to $4.21. Company officials weren’t immediately available to comment on the rumor.
Larry Peruzzi, senior equity trader at The Boston Company Asset Management, said the rumor touched on fears the sector’s troubles with soured loans would worsen.
“This is one of the fears that has kind of been overhanging the market with this whole subprime real estate concern,” he said.
Nonetheless, investors seemed able to look past some unpleasant news from retailers. Wal-Mart’s same-store sales, or sales at stores open at least a year, rose a lower-than-expected 0.9 percent in February. Wall Street had been looking for sales at the world’s largest retailer, which has lately shown some difficulty boosting its monthly numbers, to increase 1.5 percent. Wal-Mart, one of the 30 stocks that comprise the Dow industrials, fell 1 cent to $47.92.
Nordstrom rose $2.35, or 5 percent, to $52.77 after its February same-store sales jumped 9.1 percent, well above the 5.7 percent increase predicted by a Thomson Financial poll of analysts.
Same-store sales are a key measure of a retailer’s performance and a strong report Wednesday luxury department store chain Saks Inc. fanned Wall Street’s expectations for Saks’ competitors. Saks, after rising Wednesday, advanced 16 cents to $19.98. March, with the Easter holiday, could prove a more important month for retailers.
Hollis-Eden Pharmaceuticals Inc. fell $1.39, or 32 percent, to $2.89 after the U.S. government rejected the biotech drug developer’s radiation sickness treatment.
Express Scripts Inc. rose $1.36 to $76.13 after raising its hostile bid for Caremark Rx Inc., which is in the sights of retail pharmacy chain CVS Corp. Caremark advanced 69 cents, 1 percent, to $61.99.
Overseas, the Nikkei rose 1.94 percent, Hong Kong’s Hang Seng Index added 1.36 percent and the sometimes-volatile Shanghai Composite Exchange rose 1.08 percent. It was a nearly 9 percent drop in Shanghai on Feb. 27 that helped ignite a worldwide spasm of selling that led major U.S. indexes to give back their gains for the year.
In Europe, stocks added to gains after the U.S. markets advanced. Britain’s FTSE 100 closed up 1.16 percent, Germany’s DAX index added 1.44 percent and France’s CAC-40 advanced 1.27 percent.