November 15, 2006
Dow Hits Another Record After Fed News
The Oct. 25 FOMC minutes showed Bernanke & Co. remains focused on inflation. Investors also digested M&A newsStocks finished higher Wednesday, sending the Dow to its 16th all-time closing high in 32 trading sessions amid deal activity, solid manufacturing data, and tame minutes from the Federal Reserve's most recent meeting on interest rates.
On Wednesday, the Dow Jones industrial average rose 33.7 points, or 0.28%, to 12,251.71, a new record close, after touching an all-time intraday high of 12,291.73. The broader Standard & Poor's 500 index added 3.35 points, or 0.24%, to 1,396.57, briefly topping the 14,000 mark for the first time since 2000. The tech-heavy Nasdaq composite climbed 12.09 points, or 0.5%, to 2,442.75.
NYSE breadth was positive, with 21 issues advancing for every 12 declining. Nasdaq breadth was 19-12 positive.
Investors were sifting through economic reports Wednesday. The minutes from the Fed's Oct. 25 monetary policy meeting indicated the Fed remains focused on keeping inflation in check rather than stimulating growth. The current core inflation rate is "uncomfortably high," the Fed said, adding that "downside risks to economic activity had diminished a little."
The minutes were in line with Wall Street expectations. "No major changes in the FOMC's view of the world," Goldman Sachs says.
Separately, the New York Fed's Empire State manufacturing index rose to 26.66 in November from 22.92 in October, much stronger than expected.
The strong Empire State reading suggests gains in the Institute for Supply Management manufacturing index, some analysts say. "The Empire State index has not been a particularly good indicator of trends in the national ISM manufacturing index in recent months as this regional indicator has painted a significantly stronger picture of manufacturing growth," says John Ryding, chief U.S. economist at Bear Stearns. "However, one should be wary of ignoring the continued strength of both the general sentiment headline line index, and the subindexes on orders, employment, and shipments."
Deal news was also in focus. US Airways (LCC) said it has made an $8 billion cash and stock bid for Delta Air Lines (DALRQ.PK). Shares of airline stocks gained on the news.
Meanwhile, Deutsche Boerse abandoned its offer to buy rival Euronext, clearing the way for NYSE Group NYX to acquire the Paris-based exchange and create the first transatlantic stock market.
Shares of Google (GOOG) reached a new all-time high near $500 after Credit Suisse analysts set a new price target of $600 for the Internet search company. Online retailers Amazon (AMZN) and eBay (EBAY) were also higher on positive analyst comments.
Home Depot (HD) was upgraded by J.P. Morgan from underweight to overweight, but shares of the home improvement retailer dipped.
Comverse Technology (CMVT) was sharply lower after the the voicemail software maker said it found other accounting errors during an investigation into stock-options grant practices.
Tyco (TYC) reported a 38% increase in fiscal fourth-quarter profit, topping analyst estimates. But the manufacturing and services conglomerate also said it will restate results for previous periods in fiscal 2006 due to errors in its stock-options accounting practices.
In the energy markets, December West Texas Intermediate crude futures rose 48 cents to $58.76 a barrel after a weekly inventory report showed an unexpectedly large increase in crude supplies alongside surprising declines in gasoline and distillate supplies.
European markets finished higher. In London, the FTSE-100 index rose 43.2 points, or 0.7%, to 6,229.8. Germany's DAX index added 45.26 points, or 0.71%, to 6,432.64. In Paris, the CAC 40 index was up 35.25 points, or 0.64%, to 5,511.53.
Asian markets ended mixed. In Japan, the Nikkei 225 index slipped 46.08 points, or 0.28%, to 16,243.47. In Hong Kong, the Hang Seng index climbed 214.58 points, or 1.14%, to 19,093. Korea's Kospi index gained 5.17 points, or 0.37%, to 1,412.54.
Treasury yields rose following the Empire State index increase and hawkish Fed minutes. The 10-year note fell in price to 100-03/32 for a yield of 4.61%, while the 30-year bond dropped to 96-31/32 for a yield of 4.69%.