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Stocks Rise After Senate Passes Tax Bill

Posted on: Thursday, 15 September 2005, 15:00 CDT

NEW YORK - Stocks turned higher Thursday after the U.S. Senate passed a tax relief bill following Hurricane Katrina.

Investors were happy to see passage of the bill, which allows penalty-free withdrawls from Individual Retirement Accounts for flood victims and lifts limits on charitable contributions. Wall Street has been fretting about a possible downturn in consumer spending as energy prices rise, so any rule changes that make it easier to spend money are cheered.

Earlier in the session, stocks dropped after the Philadelphia Federal Reserve reported a decline in almost every broad indicator it uses to measure the health of its region's manufacturing. The readings "suggest little to no growth this month," the report said.

The Department of Labor reported lower-than-expected inflation data, which traders hoped would curb the Federal Reserve's year-plus streak of interest rate hikes. The Fed's Open Market Committee meets next Tuesday.

"A lot of investors are in a wait-and-see mode until we get the Fed behind us next Tuesday," said Arthur Hogan, chief market analyst at Jefferies & Co. "There's a real split between those who think the Fed will and should take a break and those who think it will continue" incremental rate hikes.

In early afternoon trading, the Dow Jones industrial average rose 17.37, or 0.17 percent, to 10,562.27.

Broader stock indicators rose slightly. The Standard & Poor's 500 index rose 0.94, or 0.08 percent, to 1,228.10and the Nasdaq composite index rose 0.15, or 0.01 percent, to 2,149.48.

Bonds fell sharply, with the yield on the 10-year Treasury note rising to 4.22 percent from 4.16 percent late Wednesday. The U.S. dollar was mixed against other major currencies in European trading. Gold prices rose.

Crude oil futures fell. A barrel of light crude was quoted at $64.25, down 84 cents, in trading on the New York Mercantile Exchange.

As has often been the case in recent weeks, the day's economic data was disheartening. A total of 68,000 Americans lost their jobs due to Hurricane Katrina and filed for unemployment benefits last week, the largest increase in nearly a decade. Claims filed due to Katrina have outpaced filings in the weeks following the Sept. 11 attacks. Analysts estimate that Katrina could cost around 400,000 jobs.

The Labor Department's inflation data showed consumer prices rose 0.5 percent in August, with gasoline prices jumping by the largest amount in 2 1/2 years. Excluding food and energy, the Consumer Price Index rose only 0.1 percent. Gasoline prices rose 8.3 percent, the biggest increase since February 2003.

In company news, both Delta Air Lines Inc. and Northwest Airlines Corp. filed for bankruptcy protection Wednesday, as expected. The carriers have been hurt by high fuel prices and labor problems. Delta rose 14 cents to 85 cents a share and Northwest fell 94 cents to 94 cents a share. The New York Stock Exchange is studying whether Delta should continue to be listed on the exchange.

Investment bank Bear Stearns Cos. fell $2.80 to $102.70 after its third-quarter profit swelled 34 percent to easily beat Wall Street's targets but its revenue from the company's core bond segment declined slightly.

Google Inc. rose $2.75 to $304.84 after it said it would offer $4.18 billion in stock at $295 a share. The increase came despite the fact that the new offering will dilute current shareholders' value and the company has not specified how it will use the money.

Time Warner Inc. rose 53 cents to $18.45 on a New York Post report that it was in talks with Microsoft Corp.'s Web unit, MSN, to sell a stake in America Online.

Declining issues led advancers 8 to 7 on the New York Stock Exchange, where volume was 823.29 million, up from 747.96 million at the same time Wednesday.

The Russell 2000 index of smaller companies fell 1.14, or 0.17 percent, to 665.21.

Overseas, Japan's Nikkei stock average rose 1.19 percent. Britain's FTSE 100 rose 0.68 percent, Germany's DAX index was down 0.11 percent, and France's CAC-40 was up 0.20 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Source: Associated Press/AP Online

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