Wall Street began the first full week of 2004 with a solid advance today rising on encouraging interest rate news, a strong semiconductor sales report and an upbeat forecast from software firm Siebel Systems.
The Nasdaq composite index rose 2% to its highest point in two years and the Dow Jones industrial average picked up more than 130 points.
Positive high-tech news and a Federal Reserve governor’s suggestion that interest rates might remain low sent stocks soaring as many traders got back to work after the holidays. But analysts noted that Wall Street was also following its tendency to rise during the first weeks of the year, and that the market’s momentum has carried over from 2003.
“The big picture is still the bull market,” said Alfred E Goldman, chief market strategist with A G Edwards & Sons Inc. in St Louis.
The Nasdaq composite index closed up 40.68 at 2,047.36, after a gain of 1.7% last week. It was the Nasdaq’s highest close since January 8, 2002, when it closed at 2,055.74.
The Dow closed up 134.22, or 1.3%, at 10,544.07, after a 0.8% rise last week. The index of 30 actively traded industrials last closed higher on March 19, 2002, at 10,635.25.
The Standard & Poor’s 500 index closed up 13.74, or 1.2%, at 1,122.22, following a weekly rise of 1.1%. It was the S&P’s highest close since April 19, 2002, when it ended the day at 1,125.17.
The sharp rise in the tech-dominated Nasdaq index followed positive data on semiconductor sales, and reflects sentiment that consumers and corporations alike are poised to upgrade their computer systems after several years of tight spending.
The Semiconductor Industry Association said sales rose 25.7% in November to 16.13 billion dollars from 12.83 billion dollars last year, led by rising sales of personal computers and growth in wireless markets. The group expects total sales for the year to exceed current forecasts.
Also, the Commerce Department reported construction spending rose by 1.2% in November to a seasonally adjusted annual rate of 934.5 billion dollars. It marked the fifth straight month the annual rate has set a record, reflecting a building boom generated by the lowest interest rates in more than four decades.
Investors and traders were further encouraged by remarks from Fed governor Ben Bernanke today that there was room for the central bank to leave interest rates at rock-bottom levels for the near future. The federal funds rate, the Fed’s main lever for influencing economic activity, now stands at 1%, a 45-year low.
Unemployment remains a concern, but inflation remains in check and many forecasters estimate the economy will grow at a brisk 4% this year, a rate Bernanke said was reasonable.
Meanwhile, the euro reached a new high against the dollar, which has declined about 5% in the last month amid worries over the US trade deficit, lower interest rates compared to those in Europe and fears of new terrorist attacks.
Some analysts took a cautious tone, warning that the speedy gains of the past several weeks were likely to be met with pullbacks once corporate earnings start coming in at the end of the month.
“I think personally we’re a little overextended, and everything is going to have to be righted when the earnings come in,” said Todd Leone, managing director of equity trading at S.G. Cowen Securities. “
But for now, you’ve got all this fresh money flowing into the market and everything looks rosy.”
Cowen researchers issued a report today that was broadly bullish on the tech sector, and included upgrades on 11 stocks, including Dell Inc., which closed up 93 cents at 35.22 dollars, and Microsoft Corp., which gained 69 cents to close at 28.14 dollars.
Siebel Systems Inc. rose 1.40 dollars to 15.39 dollars after it predicted better-than-expected profits and sales for the fourth quarter. Analysts saw it as a sign that business spending on software is on the upswing.
General Motors Corp. closed up 95 cents at 54.59 dollars after saying its sales fell 9.5% in December from the same period a year ago. Analysts expected to see the decline. For the year, GM sales were down 2.4%, though it set an industry sales record for trucks.
Ford Motor Co. gained 51 cents to 16.59 dollars after announcing its sales fell 8% in December, and were down 4.6% for the year.
Drug maker Eli Lilly & Co. declined 1.05 dollars to 70.19 dollars after saying it expects a substantial one-time charge for merger-related costs in the first quarter of 2004.
Advancing issues outnumbered decliners almost 2 to 1 on the New York Stock Exchange. Volume was at 1.19 billion shares, compared with 877.14 million shares traded at the same point Friday.
The Russell 2000 index, which tracks smaller company stocks, closed up up 8.07, or 1.4%, at 568.92.