should be a good week. Maybe they're all good picks... wsj item ...
i didn't dream about ucla but they won too...
Stocks Hit Highest
Since Late August,
But Bonds Retreat
By DAVE PETTIT
INTERACTIVE JOURNAL
A surprising report on third-quarter economic growth lifted stocks to their highest level since August on Friday, completing a recovery from their violent late-summer sell-off. Bonds sank and the dollar was mixed.
The Dow Jones Industrial Average climbed 97.07, or 1.1%, to 8592.10, its highest since Aug. 25, and a level unseen since a series of strong downdrafts that swept the market for six weeks -- including a 512.61-point plunge on Aug. 31. Although the industrials never settled into bear market territory -- as did the Nasdaq Composite Index and Russell 2000 -- it dropped more than 19% at worst.
The industrials finished October -- the often frightening month for investors that has been marked by the 1929 and 1987 market crashes -- with a gain of 749.48, its biggest monthly gain on record. On a percentage basis, the average rose 9.6%, its best performance for an October since 1982. But even with Friday's advance, the industrial average remains 745.87 points, or 8%, below its record 9337.97, set in July.
Other indexes also posted solid gains. The Standard & Poor's 500-stock index rose 12.74 to 1098.67, the New York Stock Exchange Composite Index climbed 7.04 to 543.35 and the Nasdaq Composite Index added 14.20 to 1771.39.
Gross domestic product in the U.S., which is the total value of all goods and services produced in the economy, expanded at a 3.3% annual rate, the Commerce Department said, well above the 2.3% rate that was forecast. The report bolstered hopes of stock investors that the U.S. economy will weather the crisis, allowing for continued growth in corporate profits.
The GDP reading follows two reports released earlier this week that suggested that there is more vigor in the economy than investors had come to believe, said Joseph Liro, a vice president at Stone & McCarthy Research Associates in Princeton. A reading on September durable-goods orders showed a 0.9% advance, rather than a decline, and third-quarter employment costs rose 1%, greater than the 0.8% rise that was forecast.
The strong data, coupled with stability seen recently in global markets, has convinced many investors that the turbulence that hit Wall Street during the summer has finally passed. That sentiment was further aided Friday when the Group of Seven industrialized nations issued a statement endorsing U.S. plans to allow the International Monetary Fund to speed emergency loans to countries facing the threat of investor panic.
All that stock investors saw as positive was greeted with disappointment in the bond market. Bond investors fear that the signs of strength will forestall any additional interest-rate cuts by the Federal Reserve. The Fed cut rates twice in a little more than two weeks early this autumn, and there have been widespread expectations that another cut would following at the central bank's next policy meeting, in November.
The G-7's statement, meanwhile, convinced some investors to pare down their "safe-haven" bond holdings. Many investors flocked to ultrasafe U.S. Treasury's during the gyrations suffered by world markets in the summer. The reassurance that IMF funds may flow to countries, such as Brazil, convinced some investors to back out of some of those positions. The G-7 includes Britain, France, Italy, Germany, Canada, Japan and the U.S.
The Treasury's benchmark long bond plunged more than 1 1/2 points, or $15 for each $1,000 face amount, at worst, before recovering a bit of the lost ground later in the day. Its yield, which moves in the opposite direction of its price, stood at 5.15%.
Meanwhile, despite the GDP data, several economists still expect the Fed to cut rates next month. Bruce Steinberg, chief economist at Merrill Lynch & Co., said one percentage point of the expansion in GDP came from businesses' efforts to increase their inventories, rather than sales of goods to consumers. "The rate of build isn't as excessive it was in, say the first quarter, but it's still more than what the economy can sustain," he said.
"The stock market is hopeful that this [GDP report] means earnings [growth], which it really doesn't, and the bond market is fearful that it means too much growth. But, in the end, I think growth is slowing and earnings are going to be weak. Both markets are overdoing it," he said.
Mr. Liro, of Stone & McCarthy, predicted that bonds will rally once the Treasury Department's big refunding auctions, scheduled for next week, are complete. Once that inflow of new supply is absorbed into the market, he said, investors will refocus their attention on economy. He doesn't expect growth to maintain its recent rate in coming quarters.
World-wide, stocks advanced in dollar terms. The Dow Jones World Stock Index was up 2.49 to 183.65 as of 7 p.m. EST.
In major market action:
Stocks rallied. Volume reached 772.6 million shares on the New York Stock Exchange, where 2,215 stocks climbed and 880 stocks fell.
Bonds slumped. The Treasury's benchmark long bond lost 1 1/8 point, or $11.25 for each $1,000 face amount. Its yield, which moves in the opposite direction of its price, rose to 5.15%.
The dollar was mixed. It was quoted at 1.6542 marks and 116.15 yen, compared with 1.6530 marks and 116.97 yen late Thursday in New York.
|
