Wall Street closes week at new 2005 high

/ Source: The Associated Press

A better-than-expected reading of the nation’s gross domestic product sent stocks substantially higher for the third straight session Friday, with the Dow Jones industrial average and Standard & Poor’s 500-stock index each posting its best close of the year.

The market’s main stock indices all finished a turbulent week higher.

Wall Street welcomed the latest GDP data, which showed the economy growing at an annualized rate of 3.8 percent in the fourth quarter, up from last month’s 3.1 percent estimate from the Commerce Department and better than economists’ 3.5 percent forecast.

As stocks rose through the session, investors managed to put aside recent fears of inflation and focus on the growing economy, which should allow the Federal Reserve to continue its policy of regular interest rate hikes without harming companies’ ability to borrow money.

“The lingering fear in the market right now is the Federal Reserve, because they are in a process of moving rates higher, but nobody knows really how far,” said Joseph Keating, chief investment officer at AmSouth Asset Management. “But if you look at today’s data, for example, you see that the economy is in good shape, fundamentals are sound. What’s not to like about the stock market? We just have to get past these fears.”

The Dow Jones industrial average was up 92.81 points, or 0.9 percent, at the close of trading, finishing at a new high for 2005 and capping three-straight up days for the index. It was the Dow’s best close since Dec. 28, giving it a 230-point gain following Thursday’s advance of 75 points and Wednesday’s 63-point rise.

The broader Standard & Poor’s 500-stock index was up 11.17 points, or 0.9 percent, at the close, while the Nasdaq composite index gained 13.70 points, or 0.7 percent. It was the S&P 500’s best showing since Dec. 31, but the technology-focused Nasdaq composite continues to lag behind the other major indices and remains down for the year to date.

Weakness in the dollar and a sharp rise in oil prices above $50 per barrel made for a volatile week on Wall Street, marked by a 174-point tumble in the Dow on Tuesday. Strong economic data helped push the indexes higher toward week’s end, however. All three indexes finished the week higher.

The GDP report helped the dollar gain ground against the euro for the first time this week, though the dollar remained mixed against other currencies. The bond market edged higher on the news, with the yield on the 10-year Treasury note slipping to 4.26 percent.

Crude oil futures — which surged earlier this week as the dollar tumbled — fell slightly after the GDP report. A barrel of light crude closed at $51.49, up 10 cents on the New York Mercantile Exchange.

Oil stocks rallied, resuming their place at the forefront of the market. Exxon Mobil Corp. was up $2.13 at $63.26, while ChevronTexaco Corp. added 78 cents to $61.94 and ConocoPhilips climbed $2.14 to $112.32. All three stocks reached all-time intra-day highs in Friday’s trading.

“You’ve seen energy stocks taking off while technology stocks have been lagging since mid-December,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “I think if energy stocks are going to lead the market, then tech stocks won’t be. Energy stocks represent higher consumer prices, and that will cause technology stocks to suffer.”

Qwest Communications International Inc. fell 34 cents to $3.86 after MCI Inc. said it would look at Qwest’s improved $8 billion offer, which included a provision to guarantee the stock portion of its bid, but that it was still standing by its $6.7 billion agreement to merge with Dow component Verizon Communications Inc. Verizon climbed 70 cents to $36.20.

MCI lost 21 cents to $22.60 after reporting a loss of 10 cents per share for the fourth quarter. Excluding one-time charges, however, the company beat Wall Street’s profit and revenue forecasts.

The Wall Street Journal reported Friday that the boards of directors for Federated Department Stores Inc. and May Department Stores Co. would meet in the next few days to finalize Federated’s bid for its struggling rival, valued at more than $10 billion. Federated fell 22 cents to $56.79, while May rose $1.50 to $35.35.

In earnings news, The Gap Inc. added a penny to $21.29 after the clothing retailer beat Wall Street’s fourth-quarter profit expectations by 3 cents per share. The company said it would also double its annual dividend.

Department store chain Kohl’s Corp. beat analysts’ forecasts by a penny per share in the fourth quarter, crediting stronger sales and higher margins. Kohl’s gained $1.90 to $47.80.

Overseas, Japan’s Nikkei stock average rose 1.1 percent. In Europe, Britain’s FTSE 100 closed up 0.7 percent, France’s CAC-40 climbed 1.43 percent for the session, and Germany’s DAX index gained 1.03 percent.