Stocks up as dollar rises on optimism about US economy; AP wire.
AP
Stocks up as dollar rises on optimism about US economy
Thursday May 1, 12:32 pm ET
By Madlen Read, AP Business Writer
Wall Street advances ahead of Friday's jobs report as dollar strengthens
NEW YORK (AP) -- Wall Street advanced Thursday as investors, while anticipating another dismal jobs report Friday, focused on the rising dollar, which strengthened on better-than-expected economic data and the Federal Reserve's apparent resolve to monitor inflation.
Traders were relieved that the Commerce Department said Thursday that consumer spending rose 0.4 percent in March, more than predicted, and that the Institute for Supply Management said U.S. manufacturing contracted in April by a bit less than anticipated.
The data was not completely positive -- consumer spending rose mainly due to rising prices for energy and food. Stripping out inflation, spending edged up only 0.1 percent. Meanwhile, the ISM's report also indicated that costs keep rising.
But the dollar rallied anyway, pushing the euro down more than 1 percent to $1.5451. The dollar's rise comes a day after the Fed lowered key interest rates by a quarter-point but suggested inflation is a growing concern and that the economy should keep growing moderately.
"What we're seeing is that maybe the economy is not falling off a cliff, but perhaps leveling off," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. "I think the Fed is over with, even though the Fed's statement didn't say that." He said the Fed on Wednesday characterized itself as "staying on the fence."
Investors indeed are anticipating another gloomy reading on U.S. employment on Friday. The Labor Department's report is expected to show a 75,000 net loss in payrolls for April -- which would be the fourth straight month of losses -- and a rise in unemployment to 5.2 percent from 5.1 percent in March. In a negative sign ahead of that data, the government said Thursday the number of newly laid off workers filing claims for unemployment benefits soared by a greater-than-expected 35,000 last week.
However, stock market participants appear to believe they have already taken into account current economic weakness. With the government sending stimulus checks out to taxpayers and Fed rate cuts still working their way through the financial system, many investors are confident the economy will rebound in the second half of the year.
In midday trading, the Dow Jones industrial average rose 78.33, or 0.61 percent, to 12,898.46.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 10.18, or 0.73 percent, to 1,395.77, and the Nasdaq composite index rose 45.73, or 1.90 percent, to 2,458.53.
Exxon Mobil Corp., one of the 30 Dow components, saw its shares decline $4.42, or 4.8 percent, to $88.65, after releasing a disappointing earnings report. Exxon Mobil's profit rose 17 percent to $11 billion -- not as high as analysts expected, despite record-high oil prices during the first quarter. Lower production volumes caused the company's profit margins to shrink.
The world's biggest oil producer's report also caused rival Chevron Corp., another Dow component, to fall $2.42, or 2.5 percent, to $93.74, ahead of its own profit report Friday.
Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.71 percent from 3.73 percent late Wednesday.
As the dollar moved higher against other currencies, gold prices dropped and light, sweet crude oil futures fell $2.28 to $111.18 a barrel on the New York Mercantile Exchange. Crude oil had recently been trading at records near $120 a barrel.
The Russell 2000 index of smaller companies rose 6.39, or 0.89 percent, to 722.57.
Advancing issues outnumbered decliners by about 9 to 5 on the New York Stock Exchange, where volume came to 540.74 million shares.
Overseas, Japan's Nikkei stock average fell 0.60 percent. European markets were closed for a holiday.
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