Dow closes above 10,000 for second day

The Dow Jones industrial average closed above the 10,000 milestone for a second day today as investors shrugged off a downbeat report on consumer sentiment to push stocks higher.

Generally strong economic news, comments from the Federal Reserve suggesting interest rates were unlikely to rise in the near future and positive corporate outlooks helped keep the Dow index of 30 actively traded industrial stocks in the positive range for the third week in a row.

“The real resistance level now will be 10,150,” said Tim Smalls, a trader at SG Cowen Securities. “People are still very sceptical after losing money over the last four years, but this market is slowly winning them over.”

The Dow Jones industrial average closed up 34.00, or 0.3%, at 10,042.16. That extended the index’s gains from Thursday, when it closed above the 10,000 mark for the first time in 18 months, largely on the news about interest rates and a strong retail sales report for November.

The broader market gauges also closed modestly higher today. The Nasdaq composite index ended the day up 6.68, or 0.3%, at 1,949.00. The Standard & Poor’s 500 index closed up 2.93, or 0.3%, at 1,074.14.

Wall Street welcomed a US government report that wholesale prices declined more than expected, suggesting inflation remains well under control, and appeared unconcerned about news that the trade deficit had widened slightly. Stocks stumbled a bit after a survey by the University of Michigan said consumer confidence was on the wane, but pushed higher by the end of the session.

The university’s preliminary report for December was said to have shown a sharp decrease in consumer sentiment, to 89.6 from 93.7 in November. Analysts had forecast a reading of 95.2 for mid-December. The survey is released only to subscribers.

“Of the three reports, that was the most important and probably dampened some of the enthusiasm that surfaced yesterday with the retail sales report,” said Lynn Reaser, chief economist and senior market strategist at Banc of America Capital Management. “We still need to see whatever revisions there are to be made and how consumers actually behave.”

The Labour Department reported a 0.3% drop in the Producer Price Index, which measures prices of goods before they reach store shelves. Economists had forecast a 0.1% rise. The reading supported the idea that the economic recovery is not fanning inflation, and bolstered hopes that interest rates would stay low.

Separately, the Commerce Department said the trade deficit soared to 41.77 billion in October. Shoppers’ preference for imports hit a record high, offsetting a sizeable gain in exports, including the best showing for sales of farm products in seven years. The October trade imbalance was up 1% from a September deficit of 41.34 billion and was the biggest deficit in five months.

Still, there were signs that investors were not sure the gains would hold through the holiday season. Retailing bellwether Wal-Mart Stores Inc lost 31 cents to end the day at 52.50.

AT&T closed down 64 cents, at 18.98, after lowering the revenue outlook for its business services unit, citing pricing pressures. The telecommunications company said would adopt an aggressive strategy to fight competition.

Advancers included Coca-Cola, which gained 98 cents to close at 49.37 after it told analysts it was “poised for a strong year” in 2004. The beverage titan forecast long-term earnings-per-share growth of 11% to 12% and expects cash from operations to remain strong next year.

General Motors rose 86 cents to close at 49.79 after saying it expects its US hourly and salaried pension plans to be nearly fully funded by the end of 2003. The news means GM probably will not have to make more cash contributions to the plans until at least 2010, based on planned additional contributions this year and normal asset returns.

United Technologies gained 2.33 to close at 91.60 after it forecast revenue and earnings growth of 10% for next year, thanks in part to the economic recovery and several acquisitions. The maker of Pratt & Whitney jet engines, Sikorsky helicopters and Otis elevators said it was on track to meet its 2003 earnings targets.

Advancers outnumbered decliners about 2 to 1 on the New York Stock Exchange. Volume was lighter, with 1.21 billion shares traded, compared with 1.43 billion shares on Thursday.

The Russell 2000 index, which tracks smaller company stocks, closed up 4.67, or 0.9%, at 547.59.