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Stocks climb as falling dollar boosts commodities
Source: Agencies |
December 2, 2009, Wednesday
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THE stock market is picking up where it left off before its scare over debt problems in Dubai.
Major stock indicators rose more than 1 percent yesterday, including the Dow Jones industrial average, which jumped 126 points and traded above 10,500 for the first time since October of last year.
The weakening dollar again boosted stocks, a pattern that has played out for months. The cheaper U.S. currency drove up commodities prices and lifted the stocks of energy and materials companies that produce them.
Analysts said a mostly upbeat array of economic reports and easing worries about the fallout from debt struggles in Dubai gave investors who had jumped out of the market last week reason to return.
The market's two-day advance leaves the Dow where it was before tumbling Friday on worries that an investment fund in Dubai wouldn't be able to pay its debts and might trigger another financial spiral like the one that followed the collapse of Lehman Brothers last year.
Rick Bensignor, chief market strategist at Execution LLC, said the drop in the dollar and a move into riskier assets like stocks is a sign that investors who moved into defensive positions are no longer worried about a spread of debt problems beyond the Middle East.
"The market has essentially shaken it off," he said. "The whole move is as if nothing happened last week."
The Dow rose 126.74, or 1.2 percent, to 10,471.58, its highest close since October last year.
The broader Standard & Poor's 500 index gained 13.23, or 1.2 percent, to 1,108.86, while the Nasdaq composite index rose 31.21, or 1.5 percent, to 2,175.81.
Economic reports were mixed, but still pointed to a strengthening trend. The Institute for Supply Management, a trade group, said overall manufacturing activity grew at a slower pace in November but that new orders rose. That signals activity could pick up in the coming months. The ISM's measure of employment grew for the second straight month after sliding for more than a year.
The snapshot of U.S. factories followed a report from a Chinese industry group that said manufacturing activity grew in November for the ninth consecutive month.
Meanwhile, the National Association of Realtors said its reading on pending home sales rose in October to the strongest level since March 2006. Economists had expected pending sales to fall.
The Commerce Department said construction spending edged higher in October, the first increase in six months.
The reports gave investors more confidence that a nearly nine-month rally in the stock market still has legs thanks to continued signs of expansion in the economy. The Dow jumped 6.5 percent in November, its best monthly gain since July, and it's up 60 percent from a 12-year low of 6,547.05 in March.
The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, fell 0.5 percent.
Crude oil rose US$1.09 to settle at US$78.37 per barrel on the New York Mercantile Exchange. Gold rose.
Bob Froehlich, senior managing director at Hartford Financial Services, said the day's news addressed some of investors' biggest worries: employment, housing and China's economy.
"What we're seeing is that we've got two of those three fixed," he said. "There are signs everywhere you look that the worst is behind us."
Froehlich said he expects the nation's unemployment rate, already above 10 percent, will worsen before it begins to improve.
Industrial names rose as commodities advanced after the reports on manufacturing and construction.
Aluminum producer Alcoa Inc. rose 28 cents, or 2.2 percent, to US$12.80. Freeport-McMoRan Copper & Gold Inc. rose US$1.11, or 1.3 percent, to US$83.91.
Energy stocks also rose. Schlumberger Ltd., which provides services to oil companies, rose 76 cents, or 1.2 percent, to US$64.65.
Home builders climbed on the day's economic reports. Beazer Homes USA Inc. advanced 16 cents, or 3.7 percent, to US$4.46. Pulte Homes Inc. rose 17 cents, or 1.9 percent, to US$9.31.
Richard Ross, global technical strategist at Auerbach Grayson in New York, said investors aren't willing to give up on the market's surge even if they have concerns it might be overdone.
"It speaks to that sort of bullish undercurrent," he said. "Whether it's misplaced optimism, that's another question."
Four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.1 billion shares compared with 1.3 billion Monday.
The Russell 2000 index of smaller companies rose 9.47, or 1.6 percent, to 589.20.
Major stock indicators rose more than 1 percent yesterday, including the Dow Jones industrial average, which jumped 126 points and traded above 10,500 for the first time since October of last year.
The weakening dollar again boosted stocks, a pattern that has played out for months. The cheaper U.S. currency drove up commodities prices and lifted the stocks of energy and materials companies that produce them.
Analysts said a mostly upbeat array of economic reports and easing worries about the fallout from debt struggles in Dubai gave investors who had jumped out of the market last week reason to return.
The market's two-day advance leaves the Dow where it was before tumbling Friday on worries that an investment fund in Dubai wouldn't be able to pay its debts and might trigger another financial spiral like the one that followed the collapse of Lehman Brothers last year.
Rick Bensignor, chief market strategist at Execution LLC, said the drop in the dollar and a move into riskier assets like stocks is a sign that investors who moved into defensive positions are no longer worried about a spread of debt problems beyond the Middle East.
"The market has essentially shaken it off," he said. "The whole move is as if nothing happened last week."
The Dow rose 126.74, or 1.2 percent, to 10,471.58, its highest close since October last year.
The broader Standard & Poor's 500 index gained 13.23, or 1.2 percent, to 1,108.86, while the Nasdaq composite index rose 31.21, or 1.5 percent, to 2,175.81.
Economic reports were mixed, but still pointed to a strengthening trend. The Institute for Supply Management, a trade group, said overall manufacturing activity grew at a slower pace in November but that new orders rose. That signals activity could pick up in the coming months. The ISM's measure of employment grew for the second straight month after sliding for more than a year.
The snapshot of U.S. factories followed a report from a Chinese industry group that said manufacturing activity grew in November for the ninth consecutive month.
Meanwhile, the National Association of Realtors said its reading on pending home sales rose in October to the strongest level since March 2006. Economists had expected pending sales to fall.
The Commerce Department said construction spending edged higher in October, the first increase in six months.
The reports gave investors more confidence that a nearly nine-month rally in the stock market still has legs thanks to continued signs of expansion in the economy. The Dow jumped 6.5 percent in November, its best monthly gain since July, and it's up 60 percent from a 12-year low of 6,547.05 in March.
The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, fell 0.5 percent.
Crude oil rose US$1.09 to settle at US$78.37 per barrel on the New York Mercantile Exchange. Gold rose.
Bob Froehlich, senior managing director at Hartford Financial Services, said the day's news addressed some of investors' biggest worries: employment, housing and China's economy.
"What we're seeing is that we've got two of those three fixed," he said. "There are signs everywhere you look that the worst is behind us."
Froehlich said he expects the nation's unemployment rate, already above 10 percent, will worsen before it begins to improve.
Industrial names rose as commodities advanced after the reports on manufacturing and construction.
Aluminum producer Alcoa Inc. rose 28 cents, or 2.2 percent, to US$12.80. Freeport-McMoRan Copper & Gold Inc. rose US$1.11, or 1.3 percent, to US$83.91.
Energy stocks also rose. Schlumberger Ltd., which provides services to oil companies, rose 76 cents, or 1.2 percent, to US$64.65.
Home builders climbed on the day's economic reports. Beazer Homes USA Inc. advanced 16 cents, or 3.7 percent, to US$4.46. Pulte Homes Inc. rose 17 cents, or 1.9 percent, to US$9.31.
Richard Ross, global technical strategist at Auerbach Grayson in New York, said investors aren't willing to give up on the market's surge even if they have concerns it might be overdone.
"It speaks to that sort of bullish undercurrent," he said. "Whether it's misplaced optimism, that's another question."
Four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.1 billion shares compared with 1.3 billion Monday.
The Russell 2000 index of smaller companies rose 9.47, or 1.6 percent, to 589.20.
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