The Standard & Poor’s 500 index climbed to its highest level in 17 months today as strong earnings and merger news helped the stock market shake off a weak consumer spending report. The three main gauges posted a weekly and monthly gain.
Trading was choppy as the Dow Jones industrials and the S&P bounced above and below 52-week highs for most of the day. Analysts said largely positive economic news persuaded investors that the economic recovery was on track.
“There have been two competing forces,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland. “Although stocks are somewhat fairly priced, investors feel it’s reasonable to purchase securities at these levels because the news has been so good.”
The S&P’s 500 index rose 3.77, or 0.4%, to 1,050.71. It was the highest level since May 31, 2002, when the index closed at 1,067.14.
The Dow closed up 14.51, or 0.2 percent, at 9,801.12, for a five-day gain of nearly 219 points. The blue chips fell shy of beating a 52-week high reached on October 14, when the Dow stood at 9,812.98.
Tech stocks edged lower, however. The Nasdaq composite index slipped 0.48, or 0.02%, at 1,932.21.
Before trading began, the government reported that consumers kept a tighter grip on their wallets in September, trimming spending by 0.3%. Analysts had expected a 0.1% drop. Consumer spending had risen 1.1% in August and 1% in July.
Still, Americans’ incomes rose 0.3% in September for the third month in a row, slightly better than the 0.2% increase analysts had expected.
Heavy consumer spending in the summer months helped boost the nation’s economic growth to 7.2% in the third quarter, the strongest performance in nearly 20 years, according to a government report released Thursday.
Stocks got some support from news that the Israeli company Teva Pharmaceutical Industries said it would acquire Sicor Inc. of Irvine, California, for 3.4 billion. Teva fell 79 cents to 56.92, but Sicor rose 1.81 to 26.78.
A spate of merger news, including the announcement Monday of Bank of America Corp.’s planned purchase of FleetBoston Financial Inc., has given investors more confidence in the business climate over the past few sessions.
But analysts cautioned that the market was likely due for pullbacks in the weeks ahead. With the earnings season winding down, and stocks at or near new highs, investors will have little incentive to send stocks higher.
“We are becoming very skeptical about the market’s prospects for further near-term gains,” said Richard Dickson, senior market strategist at Lowry’s Research Reports in Palm Beach, Florida, in a market commentary today. Describing much of the past week’s trading, “the action of the market … appeared to indicate a rally that was rapidly running out of momentum,” he stated.
Today, companies reporting higher earnings were rewarded.
Oil companies Anadarko Petroleum Corp. and ChevronTexaco Corp. reported third-quarter earnings ahead of analysts’ estimates. Anadarko shares rose 77 cents to 43.62, while
ChevronTexaco advanced 2.54 to 74.30.
Health insurer Cigna Corp. also reported better-than-expected profits and projected that net earnings from health care would rise 10% this year over last year. Its shares were up 9.08, or 18.9 percent, at 57.05.
And agribusiness giant Archer Daniels Midland Co. said earnings rose about 40% from a year ago. Its shares rose 78 cents to 14.35.
The Russell 2000 index, which tracks smaller company stocks, fell 2.15, or 0.4%, to 528.22.
Advancing issues outnumbered declining issues by a 5-to-4 ratio on the New York Stock Exchange, where volume was moderate.
Overseas, Japan’s Nikkei stock average closed Friday down 1.3 percent. In Europe, France’s CAC-40 dropped 0.4% and Britain’s FTSE 100 fell 0.3% while Germany’s DAX index was rose 0.5%.