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Major Influx of Cash Sends Stocks Higher

Posted on: Monday, 2 February 2004, 06:00 CST

A major influx of cash sent stocks higher Monday after the release of positive economic data and earnings reports.

In midafternoon trading, the Dow Jones industrial average was up 60.89, or 0.6 percent, at 10,548.96, after losing nearly 40 points earlier in the day. Broader stock indicators were also higher. The Standard & Poor's 500 index was up 9.62, or 0.8 percent, at 1,140.75, $10,549.18, unchanged and the Nasdaq composite index was up 14.20, or 0.7 percent, at 2,080.35.

The jump in volume around noontime, which coincided with a rally in stock prices, was due to a top-tier firm pulling money out of bonds and putting it in stocks, according to Keith Keenan, vice president of institutional trading at Wall Street Access. It was not immediately clear which firm carried out the transactions.

"It was fairly busy in the latest flurry," Keenan said. "It's that kind of market. Little things rouse people pretty quickly."

Earlier in the day, stocks fell after the Institute for Supply Management released its manufacturing index, which rose to 63.6 in January from 63.4 in December. The new figure was slightly below the 64 reading Wall Street expected, leading to the early drop.

"It was a good figure, but I think traders were expecting a bit more," said Rod Smyth, chief investment strategist at Wachovia Securities. "With the market rising so much between mid-November and mid-January, I think the market was in search for a catalyst for weakness to ease back on these valuations. You're going to see a lot of churning like this over the next couple of months."

Before the session began, the Commerce Department said consumer spending rose 0.4 percent in December, the second straight monthly increase and a sign that consumers believe the economic recovery will continue apace. Incomes rose 0.2 percent in December, slightly less than the 0.3 percent increase posted in November.

The not-good-enough trend in investor sentiment has sent stocks falling sharply in the past two weeks after two months of impressive gains.

"Stocks rose between mid-November and mid-January at an annualized rate of almost 80 percent per annum," Smyth said. "This market clearly cannot sustain this kind of growth, no matter how good earnings may be."

International Paper Co. reported a fourth-quarter profit of 23 cents per share before one-time charges, beating Wall Street expectations by 5 cents. Shares were up 50 cents at $42.77.

Gannett Co. jumped 50 cents to $86.21 after the media company announced a 3 percent increase in quarterly profits, meeting analysts' estimates.

Semiconductor stocks rose after the Semiconductor Industry Association reported an 18 percent hike in chip sales in 2003. Intel Corp. gained 29 cents to $30.81, while Advanced Micro Devices Inc. added 10 cents to $14.96.

Buoyed by a large increase in defense spending in President Bush's $2.4 trillion budget proposal, defense companies also gained, with Boeing Co. up $1.07 at $42.82 and Raytheon Co. rising 70 cents to $31.21.

Ford Motor Co. shed 54 cents to $14.00 after Deutsche Bank cut its rating on the company from "hold" to "sell" due to doubts the automaker could meet earnings goals.

The Russell 2000 index of smaller companies was up 3.61, or 0.6 percent, at 584.37.

Advancing issues outnumbered decliners by more than 3 to 2 on the New York Stock Exchange, where volume came to 621.92 million shares, compared to 690.77 million shares at the same point Friday.

Overseas, Japan's Nikkei stock average closed down 0.1 percent. In Europe, Britain's FTSE 100 closed down 0.2 percent, while France's CAC-40 finished 0.7 percent higher. Germany's DAX index rose 0.3 percent in late trading.

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On the Net:

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

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

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