Tax cut, earnings give stocks a boost
• Hawai'i Stocks
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By Amy Baldwin
Associated Press
NEW YORK — Wall Street regained some upward momentum today, rising on news that President Bush will sign a tax cut into law and on a favorable court decision for cigarette makers, including Altria.
Stocks gained after Bush announced he will sign a dramatically reduced compromise version of his tax-cut plan. The plan calls for $350 billion in tax cuts, just under half the $726 billion Bush wanted.
"The tax bill should excite people. ... I think a lot of people said that it wouldn't make it. That generates some enthusiasm," said Ned Riley, chief investment strategist at State Street Global Advisors in Boston.
The Dow Jones industrial average closed the session up 77.59, or 0.9 percent, at 8,594.02.
The broader market was also higher. The Nasdaq composite index rose 17.68, or 1.2 percent, to 1,507.55. Standard & Poor's 500 index advanced 8.45, or 0.9 percent, to 931.87.
For most of the week, the market has been vulnerable to profit taking, but today's rally was a return to the gains that have dominated Wall Street since April, when companies reported surprisingly strong first-quarter results.
Aside from the tax cut, analysts also attributed today's buying to better-than-expected earnings and the fact that the market is breaking important psychological levels with the Nasdaq rising above 1,500.
"That is the top that we saw in November of last year. The fact that we have seen the potential for this resistance level turning to support is going to get (investors) more excited and keep them in the market," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati.
Wall Street took in stride a Labor Department report that new applications for state unemployment insurance rose by a seasonally adjusted 7,000 to 428,000 during the week ending May 17. The increase was attributed to businesses closing following tornadoes in the Midwest.
The market managed to advance despite investors' concerns about terrorism after the Bush administration on Tuesday raised the nation's terror alert level.
Market observers say they are heartened to see the market shrug off negative news and that bad news itself appears to be waning.
"We are not getting the constant stream of (corporate) scandals or companies missing expectations or signs that the economy is deteriorating under our feet. The news we are getting tends to have a silver lining," Johnson said.
Tobacco stocks rallied today after a Florida appeals court threw out a $145 billion verdict against tobacco companies.
Altria climbed $2.75 to $41.05 and was the Dow's biggest winner. Additionally, Credit Suisse First Boston raised its rating on the company, formerly called Philip Morris, to "outperform" from "neutral."
R.J. Reynolds advanced $1.03 to $34.31.
Upbeat earnings also contributed to the market's gains. Claire's Stores rose $1.80 to $28.66 after reporting first-quarter profit that exceeded analysts' expectations by 6 cents a share.
But Lexmark declined $1.40 to $69.95 after Needham & Co. downgraded the printer maker to "sell" from "hold." National Semiconductor fell 88 cents to $22.19 after Deutsche Securities cut its recommendation to "sell" from "hold."
Advancing issues outnumbered decliners slightly more than 9 to 5 on the New York Stock Exchange. Volume was light at 1.45 billion shares but ahead of yesterday's 1.43 billion.
The Russell 2000 index, which tracks smaller company stocks, rose 4.36, or 1.1 percent, to 415.09.
