Dow Closes Above 10,000 on Retail Sales
The Dow Jones industrials closed above 10,000 Thursday, a milestone not seen in 18 months as investors cheered Federal Reserve minutes that suggested higher interest rates wouldn’t come anytime soon.
Stocks gained ground on a better-than-expected November retail sales report before sprinting higher in the late afternoon after the Fed released minutes indicating its concerns about a sluggish job market.
“What got the rally started was the Fed,” said Michael Murphy, head trader at Wachovia Securities in Baltimore. “It’s the old Goldilocks theme – low rates, low inflation and strong growth,” explaining that it was the right combination for a strong advance.
“This market is ready to a have good run to the end of the year. People are looking at the economy and are starting to see good growth,” he said.
The Dow closed up 86.30, or 0.9 percent, at 10,008.16, according to preliminary calculations. The last time the index closed above 10,000 was May 24, 2002, when the Dow stood at 10,104.26.
The broader gauges also finished higher. The Nasdaq composite index climbed 37.67, or 2 percent, at 1,942.32. The Standard & Poor’s 500 index gained 12.16, or 1.2 percent, at 1,071.21.
The milestone marked a solid comeback from the Dow’s five-year low of 7,286.27 on Oct. 9, 2002 and to many, represents the return of the bull market following three years of bitter declines.
Many analysts had wondered whether the Dow could push past 10,000 on a longer-term basis, citing psychological resistance. Indeed, the blue chips bounced up and down after the Dow crossed the 10,000 mark for all of one minute in intraday trading Tuesday.
Earlier Thursday, the Commerce Department reported a 0.9 percent rise in November retail sales as the nation’s shoppers descended on stores with a fresh burst of energy. It was the largest advance since August, and beat the expectations of economists, who had forecast a 0.7 percent rise.
Separately, the Labor Department said new claims for unemployment benefits rose last week by a seasonally adjusted 13,000 to 378,000, suggesting the pace of layoffs is leveling off.
As the economy continues to show signs of improvement, analysts say investors are moving out of the tech and small-cap stocks that have led the recovery since March and shifting their profits into larger blue-chip companies. The economic news, while positive on balance, may be temporarily taking a back seat to this rotation, said Alexander Paris, economist and market analyst for Chicago-based Barrington Research.
“People have been sitting right on the fence, wondering, ‘Should I take profits now and lock in performance?’ But they don’t want to miss the next leg up,” Paris said. “So they may be switching to these companies that have less downside risk.”
Still, stocks across all sectors remain extremely vulnerable to negative news, with cautious investors quickly dumping shares when there are signs of trouble.
Goodyear Tire & Rubber Co. declined 84 cents to $6.52 after the company delayed filing its 2002 10-K because of accounting problems in Europe. The filing was being closely watched by union officials because Goodyear had promised to strengthen its balance sheet without laying off workers and closing plants, and had planned to raise cash through debt and other financing. The filing delay will likely postpone those efforts.
Wal-Mart Stores Inc. fell 14 cents at $52.81 on reports that it has approached British supermarket group Safeway PLC with an offer to buy part of its business for nearly $2 billion. The move is aimed at foiling a rival offer for Britain’s No. 4 grocer.
Unisys Corp. dropped $1.46 to $14.44 after company executives said they were expecting pension expenses of $80 to $90 million next year. Though the firm reiterated its guidance, analysts said the expenses were sure to hurt its bottom line in 2004.
Gainers included IKON Office Solutions Inc., which rose $1.75 at $10.55, after it agreed to sell certain assets and liabilities of its IOS Capital unit to GE Vendor Financial Services for about $1.5 billion. General Electric Corp. was up 67 cents at $30.39.
Advancing issues outpaced decliners more than 3 to 1 on the New York Stock Exchange. Volume was moderate.
The Russell 2000 index, which tracks smaller company stocks, rose 14.43, or 2.7 percent, at 542.92.
Overseas, Japan’s Nikkei stock average finished 1.7 percent higher. In Europe, France’s CAC-40 rose 0.8 percent, Britain’s FTSE 100 lost 0.1 percent and Germany’s DAX index gained 1.0 percent.
—-
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com