US stocks end higher, sidelined cash finds a home
By Huw Jones
NEW YORK, Oct 29 (Reuters) - U.S. blue chips rallied Thursday as investors put sidelined cash back to work amid fewer concerns about Brazil's teetering economy and a lack of fresh news to derail stocks.
''Sentiment has turned more positive and the path of least resistance is up, not that the market is going to make huge progress,'' said Roy Blumberg, a market analyst at First Allied Securities.
The Dow closed unofficially up 123.06 points, or 1.5 percent, at 8495.03.
Dealings were subdued and ground to a virtual halt as the space shuttle containing veteran astronaut John Glenn blasted off early afternoon.
But with the shuttle safely in space, the Dow then took off too. On the New York Stock Exchange, advancing issues led decliners by almost two-to-one, but volume was modest at 698 million shares.
Analysts said the latest money flow data helped to lure investors back into stocks. The Investment Company Institute said a net $6.53 billion went into stock mutual funds in September, reversing a sharp $11.7 billion outflow in August.
''The market is being helped by the numbers from the ICI that show strong flows of money into mutual funds in September. Small investors have not lost their optimism,'' said Hugh Johnson, chief investment officer at First Albany.
''Portfolio mangers have cash built up and there is nothing more disquieting than having cash in a rising market because you don't want to be left out,'' Johnson said. ''There is a growing sense of urgency to get that cash to work.''
The advance in stocks was broadly based.
The Nasdaq rose 19.84 points, or 1 percent, to 1757.19.
The S&P500 index gained 17.84 points to 1085.93.
''There are no real sellers out there,'' said Charles Payne, head analyst at Wall Street Strategies. ''There is a sense that no one
wants to be left out of the game.''
Brazil's $84 billion austerity plan unveiled Wednesday has helped to create some cautious optimism that Latin America's biggest economy was less likely to go belly up and dent U.S. exports.
An imminent $30 billion International Monetary Fund bailout for Brazil is also helping sentiment.
''The fact that in Brazil they are working to try to turn that ship around helps us psychologically,'' Payne said.
The Dow took a breather for the past week after recovering sharply from its summer lows, but even after Thursday's sharp gains, the blue chip index remained anchored inside the 8100 to 8600 point range that analysts expect hold near-term.
''We are not really making progress. We have been in a trading range for a week or two,'' Blumberg said.
Some investors were also looking to Friday when the government unveils its first batch of estimates for third quarter economic growth. Investors will scrutinize the data for signs of slowdown that could give the Federal Reserve another excuse to lower rates at its next meeting on November 17.
On Thursday, the government said that the employment cost index, closely watched for signs of wage-related inflation pressure, rose by a stronger-than-expected 1 percent in the third quarter, but stocks shrugged off the data.
''With the economy slowing, earnings momentum diminishing, and the unemployment rate increasing, we expect labor costs to remain contained,'' said Gerald Cohen, senior economist at Merrill Lynch.
Easing jitters about financial problems in Brazil and elsewhere helped to push the influential financial stocks higher.
The Dow's financial components, J.P. Morgan & Co. (NYSE:JPM - news) and Citigroup (NYSE:CCI - news) were among the best performers. Morgan closed up 3-3/8 at 94-1/2. Citigroup was up 1-3/8 at 45-1/2.
Micron Technology (NYSE:MU - news) was up 4-5/16 at 40 in heavy trade, hitting a new year high after a company official told an investor conference that pricing for Micron's computer memory chips was expected to remain firm through the holiday season's computer building boom.
Healthcare stocks were also strong, with beleaguered Columbia/HCA Healthcare Corp. (NYSE:COL - news) up 2-5/8 at 21-5/8 on heavy institutional buying.
Shares in Ciena Corp. (Nasdaq:CIEN - news) rallied late session amid renewed hope that the battered maker of telecommunications equipment was once again a possible takeover target. Ciena closed up 3-3/16 at 15-7/16.
Drug services provider Parexel International Corp. (Nasdaq:PRXL - news) slid 15-3/16 to 21-1/16 on disappointing earnings, but Pharmacia & Upjohn Inc. (NYSE:PNU - news) was up 2-13/16 at 50-5/8 on sold third quarter profits, helping to boost the drug stocks.
Wellpoint Health Networks Inc. (NYSE:WLP - news) rose 9-11/16 to 71-15/16 on a bullish outlook for profits.
The Russell 2000 small cap index closed up 3.01 points at 374.48. The long bond rose 23/32 to yield 5.08 percent.
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