News Article
BusinessWeek.com
September 27, 2006
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Stocks Rise as Dow Flirts With Record

Durable goods orders unexpectedly dropped, while new home sales posted surprising gains. Crude futures surged near $63

Stocks finished modestly higher Wednesday, paring early gains and narrowly missing record highs after a mixed bag of economic data. End-of-quarter portfolio adjustments helped influence trading, says Standard & Poor's Equity Research.

The Dow Jones industrial average rose 19.85 points, or 0.17%, to 11,689.24, its second highest close and within 33 points of its all-time best of 11,722.98, reached Jan. 14, 2000. The broader Standard & Poor's 500 index edged up 0.25 points, or 0.02%, to 1,336.59. The tech-heavy Nasdaq composite added 2.05 points, or 0.09%, to 2,263.39. 

NYSE breadth was decidedly positive, with 21 issues advancing for every 13 declining. Nasdaq breadth was 17-13 positive.

The market's recovery from summer lows is just the latest rebound in the current market cycle, some analysts say. "For the eighth time in this bull market, an apparent technical breakdown has been followed by higher prices," says Brian Reynolds, chief market strategist at M.S. Howells. "We are at a point similar to the prior times where bearish investors are just beginning to realize that their fears were again overblown."

Still, a number of technical indicators are putting up warning flags, others say. "These signs of weakness do mean that investors need to remain alert and not become complacent about the market's prospects in the months ahead," says Richard Dickson, senior market strategist at Lowry's Reports.

Investors were digesting mixed economic reports Wednesday. New home sales rose 4.1% in August, the National Association of Realtors said. Economists were expecting a 3% decline.

On the other hand, durable goods orders fell 0.5% in August, compared to projections for a 1.5% increase. Investors were also awaiting Thursday's final reading on second-quarter economic growth.

In corporate news, Intel (INTC ) was higher after a federal judge dismissed part of Advanced Micro Device's (AMD ) antitrust lawsuit against the rival chipmaker.

Meanwhile, General Motors (GM ) was reportedly asking for a multibillion dollar payment from Nissan (NSANY ) and Renault as a condition for forming an alliance with the two automakers.

Drugmaker Merck (MRK ) was higher after a federal jury in New Orleans found the company not liable for the heart attack of a 56-year-old man who took the Vioxx painkiller.

Fast-food giant McDonald's (MCD ) was higher as the company raised its quarterly dividend by 49%.

Telecom stocks hampered the Dow. AT&T (T ) and Verizon (VZ ) were the blue-chip benchmark's biggest losers.

Also on the downside, Red Hat (RHAT ) was sharply lower after the open-source software distributor reported a 34% drop in second-quarter earnings.

Shares of BearingPoint (BE) sank after the consulting company said it would have to delay a regulatory filing following a court's finding that BearingPoint was in default on its debt.

On the M&A front, shareholders of Univision Communications (UVN ) approved the proposed $12.3 billion sale of the Spanish-language broadcaster to a private investor group.

In the energy markets, November West Texas Intermediate crude oil futures closed up $1.95 at $62.96 a barrel amid speculation that OPEC may move to boost prices. Earlier, a weekly inventory report showed that crude supplies dropped much less than expected.

European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 56.5 points, or 0.96%, to 5,930.1. Germany's DAX index added 29.08 points, or 0.49%, to 5,989.71. In Paris, the CAC 40 index was up 23.51 points, or 0.45%, to 5,243.1.

Asian markets ended sharply higher. Japan's Nikkei 225 index rallied 390.42 points, or 2.51%, to 15,947.87. In Hong Kong, the Hang Seng index climbed 213.43 points, or 1.23%, to 17,521.51. Korea's Kospi index advanced 16.06 points, or 1.19%, to 1,360.03.

Treasury Market

Treasury yields ticked higher following the unexpectedly firm housing report. The 10-year note edged down in price to 102-07/32 for a yield of 4.59%, while the 30-year bond fell to 96-12/32 for a yield of 4.73%.