Dow growth best in 16 years
Advertiser News Services
NEW YORK — The Dow Jones industrial average finished its best month in almost 16 years as earnings growth at companies such as Microsoft Corp. and Citigroup Inc. shored up investor confidence.
Associated Press
For the month, the Dow climbed 10.6 percent, its largest monthly gain since January 1987 and best October in two decades. The Standard & Poor's 500 Index rose 8.7 percent, its biggest advance since March 2000.
Traders on the floor of the New York Stock Exchange yesterday finished the best month for the Dow Jones industrial average since January 1987. The index climbed 10.6 percent in October, but the gains failed to lift the market from lows reached earlier this year. The Dow has a year-to-date loss of 16.2 percent.
The rally has provided some relief in a bear market that has erased more than $7.6 trillion of investor wealth since March 2000. Hewlett-Packard Co. and International Business Machines Corp. led the advance in the 30-stock Dow, whose members include seven of the world's 10 biggest companies.
The gains "must make the average investor feel there is some hope out there that we're not going to zero," said Thomas Garcia, head trader at Thornburg Investment Management of Santa Fe, N.M.
Yesterday, the Dow closed down 30.38, or 0.4 percent, at 8,397.03, according to preliminary calculations.
Broader indicators were mixed. The Nasdaq composite index rose 2.98, or 0.2 percent, to 1,329.71. The Standard & Poor's 500 index fell 4.95, or 0.6 percent, to 885.76.
While stocks struggled yesterday, analysts said investors still are feeling upbeat after the three-week rally on better-than-expected earnings news.
"What is important to remember is that October has frequently been a bear-market killer. That is to say that bear markets have ended in October," said Alan Ackerman, executive vice president at Fahnestock & Co.
"It is too early to tell if that is the case" this time.
October's gains failed to lift the market from dreadful lows reached earlier this year. The Dow has a year-to-date loss of 16.2 percent, while the Nasdaq has plunged 31.8 percent and the S&P has slid 22.9 percent.
Much of October's success is owed to surprisingly strong third-quarter earnings reports.
Some investors said the gains might evaporate. Indexes rallied more than 17 percent in July and August before slumping to five- year lows Oct. 9.
"We've done this before," said Jon Brorson, who helps manage $300 billion as head of equities at Northern Trust Corp. in Chicago. "There's a huge question whether it's sustainable. We're very skeptical."
A decline in consumer confidence to a nine-year low and concern over a slowing economy might limit the advance, he said.
"The consumer's a little shaky, the economy's a little shaky, thus earnings are a little shaky," he said. "I've seen this play before, and the ending's ugly."
The current rally began when the Dow and S&P 500 reached their lowest levels since 1997. The S&P 500 had lost 49 percent from its March 2000 peak.
Some investors said speculation the Federal Reserve might lower interest rates this year was giving stocks an added boost. Benchmark lending rates are at the lowest level in four decades, 1.75 percent.
Federal funds futures contracts, which gauge the average overnight rate in a particular month, show that traders see an 85 percent chance of a quarter-point cut next week. That's up from 21 percent early last week, based on the November contract's 1.58 percent yield.
Yesterday's market was mixed partly because the economic news was somewhat disappointing and gave investors reasons to be cautious. The Commerce Department report of U.S. economic growth at a 3.1 percent annual rate in the summer, though brisk, fell short of the 3.6 percent clip that analysts had expected.
And the Purchasing Management Association of Chicago reported that its index of business activity fell to 45.9 in October, the second straight month with a reading below 50, showing contraction in the economy. The index is considered a harbinger of the Institute for Supply Management's national survey on manufacturing, due out tomorrow.
Advancing issues narrowly outnumbered decliners 7-to-6 on the New York Stock Exchange, where volume was light.
