Wall St. feasts on sweet news from economy

Jobs, manufacturing, confidence all perk up

Dow leaps 102, Nasdaq 34

It's a `Santa Claus rally,' says Price trading boss

Economic reports buoy the market

December 19, 2003|By Bill Atkinson | Bill Atkinson,SUN STAFF

A raft of positive economic news sent stocks up across the board yesterday, and the Dow Jones industrial average shot to its highest close in 19 months as investors gained confidence that the economic recovery is firmly under way and the conflict in Iraq is going better.

The Dow, an index of 30 blue-chip stocks, jumped 102.82 points, or 1 percent, to close at 10,248.08. The index is up 22.85 percent for the year, and has risen 465 points since the month began. It was the second 100-plus point gain of the week.

The Standard & Poor's 500 stock index, a broad measure of stock market performance, rose 12.70 points, or 1.2 percent, to 1,089.18.

The technology heavy Nasdaq climbed 34.85 points, or 1.8 percent, to 1,956.18, and is up a stunning 46.5 percent since the year began.

"The path of least resistance seems to be on the upside," said Arthur Hogan, chief market analyst in Boston at Jefferies & Co. "We seem to flip a switch at 2 p.m. and really step on the gas."

"It certainly can be called a Santa Claus rally," added Andy Brooks, head of equity trading at T. Rowe Price Associates Inc. in Baltimore. "The economic news coming is certainly very positive. We got more of it today."

The news couldn't have been better for sparking a rally.

First-time claims for unemployment benefits slipped by a seasonally adjusted 22,000 to 353,000, lower than analysts had expected, and reinforced the belief that the job market is strengthening.

More fuel for the market came from the Conference Board, a New York-based research group that tracks consumer confidence, which reported that its index of leading economic indicators grew in November for the sixth time in seven months.

The Federal Reserve Bank of Philadelphia also said its manufacturing index surged to its highest level in 10 years and factories added workers at a rapid pace.

"We have strung together a number of positive economic data points and a number of good reports," said Thom Melcher, chief investment officer at PNC Advisors in Philadelphia.

"People are feeling the stability in the economy is for real and is likely to remain with us as we begin 2004."

Melcher said economists were expecting higher unemployment claims. "The employment front appears to be firming," he said. "The jobless recovery is no longer jobless."

Stocks took off at the opening bell and climbed throughout the day. At around 2:30 p.m., the Dow burst higher and just before 3:30 p.m. hit a high of 10,254.1, a 112-point gain, before easing.

"The mood was positive," Brooks said. "If you were trying to buy stocks on the bid side and trying to be patient, stocks were ... bid up today. There is a lot of enthusiasm."

The upbeat mood among investors is coming not only from new economic numbers, but also from a general sense that the economy is rolling and can grow well into next year, experts said.

Interest rates are low, corporate profits are rising, jobs are being created and the capture of Saddam Hussein, the former Iraqi dictator, is an indication that the situation in Iraq is going better, Melcher said.

Robert McDorman, a principal at Investment Counselors of Maryland LLC in Baltimore, said the relative lack of bad news has helped spur the market.

"Plus, people are almost desperate to get in the game," he said.

"Mutual fund flows are very strong. Unless some event occurs to scare people I don't think you have a real headwind."

Market experts see the Dow staying above 10,000 for the year.

Brooks said he doesn't see why the market "wouldn't be in a position to hold these gains."

The market should continue to rise next year, experts said, but at a slower rate, perhaps 10 percent to 12 percent.

Melcher, who predicts a 10 percent gain in the S&P next year, said the market has increased on average 13.5 percent during presidential election years.

But anything could derail the market, including another terrorist attack, a continued dive in the dollar, souring consumer sentiment and rising interest rates, experts said.

"Right now, most people are awfully bullish," McDorman said. "And there is no reason why they shouldn't be."

Bloomberg News contributed to this article.

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