News Article
BusinessWeek.com
September 28, 2006
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Stocks Gain as Dow Skirts Record

The blue-chip benchmark posted its all-time second-highest close. Second-quarter GDP was revised down, while weekly jobless claims declined

Stocks finished modestly higher Thursday following a downward revision to second-quarter economic growth and a drop in weekly jobless claims. The Dow Jones industrial average briefly touched above its record closing high, only to pare gains. Investors were squaring up their portfolios for the end of the third quarter, while the outlook for economic growth and inflation remains unclear, says Standard & Poor's Equity Research.

The Dow rose 29.21 points, or 0.25%, to 11,718.45, its second-best close ever, after temporarily crossing its all-time closing high of 11,722.98, reached Jan. 14, 2000. The broader Standard & Poor's 500 index added 2.56 points, or 0.19%, to 1,339.15. The tech-heavy Nasdaq composite gained 6.63 points, or 0.29%, to 2,270.02. 

NYSE breadth was slightly positive, with 18 issues advancing for every 15 declining. Nasdaq breadth was 16-14 positive.

A report on economic growth was in focus Thursday. Gross domestic product (GDP) growth was revised down to 2.6% in the final reading for the second quarter, from a preliminary 2.9% and 2.5% in the advanced report. "Quarterly figures continue to bounce around either side of 3.0%, and we suspect this pattern will continue through 2007," says Action Economics.

The numbers did not sway the markets much, some analysts say. "Markets [are] showing little reaction to [the] report because it's old news," says Beth Ann Bovino, senior economist at S&P. "Traders are more likely focused on the fourth quarter and the following year."

Investors were also weighing unemployment figures. Jobless claims fell 6,000 to 316,000 in the week ended Sept. 23, from an upwardly revised 322,000 a week earlier.

Reports due Friday could shed more light on the economic outlook. Data releases on tap include personal income, inflation, the University of Michigan's consumer sentiment index, and the Chicago purchasing managers index.

On the company side, Hewlett-Packard (HPQ) announced the resignation of its general counsel, Ann Baskins, effective immediately. In Washington, D.C., recently ousted Chairwoman Patricia Dunn told Congress an outside investigator assured her that the phone records at the center of the company's leak-probe scandal were obtained legally.

Shares of General Motors (GM) gained on reports that billionare investor Kirk Kerkorian's Tracinda group has expressed interest in buying up to 12 million more shares of the automaker, boosting its stake to more than 10%.

Earlier, GM CEO Rick Wagoner said he's "absolutely confident" the company can survive without an alliance with fellow automakers Renault and Nissan (NSANY ). He said talks could continue past a previously set Oct. 15 deadline.

In M&A activity, Disney's (DIS ) Buena Vista Games videogame unit agreed to buy racing games outfit Climax Racing from the U.K.'s Climax Group for an undisclosed sum.

Steelmakers such as U.S. Steel (X ) came under pressure following a report that steel inventory pile-ups are creating worries of a glut.

An analyst downgrade weighed on Time Warner (TWX ). The shares fell after J.P. Morgan lowered its recommendation on the stock from overweight to neutral.

In other analyst calls, ThinkEquity reportedly downgraded chipmakers Advanced Micro Devices (AMD ) and Nvidia (NVDA ) from buy to sell. Separately, Citigroup raised its its price target on AMD from $27.50 to $31, maintaining a buy rating.

In the energy markets, November West Texas Intermediate crude oil futures closed down 20 cents at $62.76 a barrel. Reports that some OPEC members would "unofficially" cut productions caused a short-lived jump in crude futures, but prices eased as Kuwait denied the reports, says Action Economics.

European markets finished mixed. In London, the Financial Times-Stock Exchange 100 index rose 41.2 points, or 0.69%, to 5,971.3. Germany's DAX index edged down 0.55 points, or 0.01%, to 5,989.16. In Paris, the CAC 40 index added 6.91 points, or 0.13%, to 5,250.01.

Asian markets ended higher. Japan's Nikkei 225 index gained 76.98 points, or 0.48%, to 16,024.85. In Hong Kong, the Hang Seng index crept higher 9.06 points, or 0.05%, to 17,530.57. Korea's Kospi index advanced 11.4 points, or 0.84%, to 1,371.43.

Treasury Market

Treasury yields ticked higher after the day's economic reports came close to expectations. The 10-year note fell in price to 102-00/32 for a yield of 4.62%, while the 30-year bond dropped to 95-28/32 for a yield of 4.76%.