Posted at 10:45 a.m., Thursday, May 17, 2001
Dow closes above 11,000
Associated Press
NEW YORK — Investors maintained their enthusiasm over lower interest rates today, extending the big rally that allowed the Dow industrials to close above 11,000 for the first time since September.
A positive economic report helped the stock market extend the large advance it made yesterday, when investors bought up shares in response to the Federal Reserve's decision Tuesday to lower interest rates by 0.5 percentage point.
The Dow Jones industrial average closed up 32.66 at 11,248.58, according to preliminary calculations. The Dow's moderate gain followed the 342-point climb it made yesterday when the blue chip average closed above 11,000 for the first time since Sept. 14.
The broader market also finished higher. The Nasdaq composite index advanced 27.20 to 2,193.64, and the Standard & Poor's 500 index moved up 3.50 to 1,288.49.
With five interest rate cuts so far this year, investors and market analysts are increasingly hopeful that the economy and earnings will turn around in the second half of 2001.
"The good news is the consumer, and ultimately business investors, are going to be in the mood to spend and invest money," said Kevin Caron, associate strategist at Gruntal & Co.
A key economic report out early today increased optimism that the economy is starting to recover. The Conference Board's Index of Leading Indicators, an important gauge of future economic activity rose 0.1 percent in April, gaining after two consecutive monthly declines.
Among today's gainers were companies that posted better-than-expected earnings. Kmart advanced 45 cents at $10.58 after announcing it lost 2 cents a share in the first quarter, 5 cents less Wall Street expected.
Hewlett-Packard, which beat earnings forecasts yesterday by 3 cents a share, rose sharply, up $4.16 at $30.90.
Investors also bid up some major industrial shares — which stand to benefit as the economy strengthens — like Boeing, up $2.04 at $68.79.
Another sign of investors' resurgent optimism could be seen in what issues they sold today, including stocks in so-called defensive sectors like consumer products. Procter & Gamble fell $1.14 to $67.15.
Analysts are confident the market will be able to hang onto much of its gains because the economy and earnings appear to be through the worst — a departure from the rate-cut rallies earlier this year that faded as worries about the future set back in.
"Once the market gets to this point when it starts to smell recovery, you can indeed have very good rallies," said Caron, the strategist for Gruntal.
However, analysts also said that the market is bound to take equally sizable tumbles as companies continue to report disappointing earnings well into the third quarter.
"The market is headed higher in a very volatile way with strong upswings like (yesterday) and strong downswings that are going to scare the pants off some people. But this is all typical in the early stages of a market advance," said Al Mirman, market strategist for V Finance in Sarasota, Fla.
Advancing issues outnumbered decliners 3 to 2 on the New York Stock Exchange where volume was 1.34 billion shares, down from 1.35 billion at the same point yesterday.
The Russell 2000 index, which measures the performance of smaller companies stocks, rose 7.55 to 504.76.
Overseas markets were higher with Japan's Nikkei stock average ending the day up 1.6 percent. In Europe, Germany's DAX index and Britain's FT-SE 100 each rose 0.4 percent, and France's CAC-40 advanced 1.3 percent.
