Modest gains for US stocks

Wall Street posted modest gains today as mixed economic news and a car bombing in Iraq revived investors’ caution following Monday’s big rally.

“We continue to be taking some comfort in improving economic data,” said Jack Caffrey, equities strategist at JP Morgan Private Bank. But “while investors want to anticipate the (good) news we have been getting recently, they are at the same time being cautious about prices”.

The major indexes fluctuated throughout the session. After falling as much as 60.72, the Dow Jones industrial average closed up 16.45, or 0.2%, at 9,428.90. On Monday, the Dow gained 90.76 to close at its highest level in 14 months, or since June 20, 2002.

The market’s broader gauges were also higher. The Standard & Poor’s 500 index advanced 2.59, or 0.3%, to 1,002.33.

The Nasdaq composite index rose 21.50, or 1.2%, to 1,760.99. Analysts said the Nasdaq was able to post a bigger gain than the other major indexes because its smaller company components have not rallied with the same intensity as Dow and S&P stocks.

The Russell 2000 index, which tracks smaller company stocks, advanced 7.77, or 1.6%, to 488.69.

While economic data have been improving, the market has advanced only modestly during August, typically a slow time on Wall Street as traders and investors take summer holidays.

“We’re obviously in the summer doldrums, but you know this market wants to go up,” said Scott Wren, equity strategist for AG Edwards & Sons.

The market’s upward momentum was slowed somewhat by a report on the University of Michigan’s preliminary August consumer sentiment index. Sentiment so far this month stands at 90.2, below July’s 90.9 level and beneath analysts’ forecast of 91.2.

Investors closely monitor the mood of consumers because their spending accounts for two-third of the US economy. By the end of today, investors had decided that consumer sentiment was at healthy levels.

“Consumer confidence, while not as high as expected, is still rather positive at comfortably over 90,” Caffrey said.

Wall Street also ended up looking past a car bombing in Baghdad that caused the collapse of the hotel housing the UN headquarters in Iraq. The explosion killed at least two people and wounded dozens, including the chief UN official in Iraq.

Stocks got some support from a Commerce Department report that home construction rose in July to the highest level in more than 17 years. The housing market showed no indication it might pull back as mortgage rates began to rise.

Housing construction totalled 1.87 million units at a seasonally adjusted annual rate last month, an increase of 1.5% over June’s 1.85 million units. The gain, which put housing starts at their highest level since April 1986, was much better than analysts’ forecast, calling for a dip.

Home builders were among Wall Street’s winners today. Centex climbed 2.69 to 78.59, while Lennar rose 2.40 to 68.55.

The Nasdaq got a boost from office supply retailer Staples and Broadcom. Staples advanced 2.15 to 22.53 after posting second-quarter earnings that topped analysts’ expectations by 2 cents a share and raising its outlook for the rest of the year.

Broadcom rose 2.50 to 25.35 after CIBC World Markets and Thomas Weisel each upgraded the communications chipmaker.

Advancing issues outnumbered decliners about 3 to 2 on the New York Stock Exchange. Trading volume was moderate.