Market recaptures momentum on falling oil, relief about Fed rate hike.
November 11, 2004: 5:36 PM EST
By Alexandra Twin, CNN/Money Staff Writer
NEW YORK (CNN/Money) - Stocks rallied Thursday, with investors taking comfort in falling oil prices and bets that the Fed will keep raising rates at a moderate pace.
The Dow Jones industrial average (up 84.36 to 10,469.84, Charts) added 0.8 percent and the broader Standard & Poor's 500 (up 10.57 to 1,173.48, Charts) index gained about 0.9 percent.
The Nasdaq composite (up 26.71 to 2,061.27, Charts) added 1.3 percent.
"The rally is a little surprising," said Mark Bryant, senior vice president at Brean, Murray & Co.
"I think oil is helping, but I also think with the bond market closed and the trading volume low, if there's a bias in the market, it's more likely to be exaggerated," he added. "Right now the bias is positive."
The Treasury bond market was closed Thursday in observance of the Veterans' Day holiday.
After the close, Dell (Research) reported third-quarter sales and earnings that rose from a year ago and were basically in line with estimates. The PC-maker also said it was on track to meet fourth-quarter forecasts. Shares seesawed after hours, turning higher as of 5:30 p.m. ET.
Friday is heavy on economic reports.
The report on September business inventories is due before the Friday open. Inventories likely rose 0.5 percent after rising 0.7 percent in August, according to Briefing.com estimates.
October retail sales data are also due early Friday. Sales are expected to have climbed 0.1 percent after rising 1.5 percent in September. Sales excluding autos are expected to have risen 0.6 percent, after rising 0.6 percent in September.
The University of Michigan's first read on consumer sentiment for November is due shortly after the start of trading. The sentiment index is forecast to increase to 93 from 91.7 in October.
Thursday's market
Stocks had stalled in the past three sessions as investors awaited Wednesday's Fed news and took time to digest the market's late-October and post-election three-week rally. But the advance seemed to resume Thursday.
Barry Hyman, equity strategist at Ehrenkrantz King Nussbaum, said the market is still celebrating the strong October employment report, the presidential election results and the decision by the Fed to keep raising rates at a measured pace.
"All of these factors should continue to boost the economy into 2005," he said.
"There are certainly negatives out there," Hyman said, referring to Cisco's mixed earnings Tuesday and Coca-Cola's news Thursday. "But the psychology has changed and the bad news isn't having as big an effect on the broader market."
On Wednesday, the Fed boosted a key short-term rate for the fourth time this year, by another quarter-percentage point, to 2 percent, a move that had been widely expected.
In its statement, the central bank again pledged to keep raising interest rates at a pace "likely to be measured," a mantra comforting to investors.
Oil prices slid Thursday as traders again took profits on signs of increased global supplies. U.S. light crude for December delivery tumbled $1.44 to settle at $47.42 a barrel on the New York Mercantile Exchange.
Also adding support: Hopes that recent events in the Middle East, including the death of Palestinian leader Yasser Arafat, may help bring peace to the long-troubled region, something Israeli Prime Minister Ariel Sharon alluded to overnight.
On the move
Gains were broad-based, with 24 out of 30 Dow components rising.
Gainers included: Hewlett-Packard (up $0.28 to $19.25, Research), Boeing (up $0.90 to $54.30, Research), Home Depot (up $0.76 to $42.77, Research) and Procter & Gamble (up $1.00 to $54.00, Research).
One of the few Dow losers was Coca-Cola (down $0.21 to $40.96, Research), which said it was cutting long-term earnings and sales targets to reflect its extended slump in North America and other markets. Coke shares recovered from earlier lows to close down just 0.5 percent.
Chip stocks rose after Merrill Lynch upgraded Advanced Micro Devices (up $1.30 to $18.59, Research) to "buy" from "neutral." The Philadelphia Semiconductor (up 8.50 to 414.26, Charts) index, or the SOX, rose 2.1 percent.
Thursday brought a pair of merger and acquisition developments.
Blockbuster has offered $700 million to buy rival Hollywood Entertainment in a deal that would beef up Blockbuster's position as the No. 1 video rental chain. The deal would be worth about $1 billion including assumption of $300 million in Hollywood debt, Blockbuster said, adding that discussions are in the early stages.
Shares of Hollywood Entertainment (up $1.13 to $10.93, Research) rallied 11.5 percent on the news in active Nasdaq trade. Blockbuster (up $0.82 to $8.20, Research) shares jumped more than 11 percent.
PeopleSoft (down $0.36 to $22.43, Research) said Wednesday that its board again rejected Oracle (down $0.24 to $13.14, Research)'s hostile takeover bid. Oracle said it will now leave it up to shareholders as to whether or not to accept the offer. PeopleSoft and Oracle stock both fell.
A number of retailers reported quarterly earnings Thursday.
Among the movers, luxury jewelry retailer Tiffany & Co (down $1.84 to $30.29, Research) fell 5.7 percent after reporting lower-than-expected earnings and cutting its profit forecast, due to weaker sales.
Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by 12 to five on volume of nearly 1.39 billion shares. On the Nasdaq, winners topped losers by almost two to one as 1.77 billion shares traded.
In currency trading, the dollar fell versus the euro and yen. On Wednesday, the dollar hit a record low versus the euro, which topped $1.30 for the first time.
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