Will investors have any room for holiday turkey and pumpkin pie after furiously gobbling up stocks on Wednesday? The market surged amid a flurry of positive economic news on the day before Thanksgiving. The major indexes had more than recovered their losses from Tuesday's down session.
"On the eve before Thanksgiving, the U.S. economic data are pointing to a rebounding economy," said Dr. Sherry Cooper, global economic strategist for BMO Financial Group.
Economists were surprised by the bounty of positive economic data. On the labor front, initial jobless claims for the week ended Nov. 23 fell for the second straight week.
In the manufacturing sector, the Chicago purchasing managers' index for November came in strong, at 54.3 v. 45.9 in October. (A reading above 50 indicates expansion.) And durable goods orders rose a stronger-than-expected 2.8% in October, following an upwardly revised 4.6% decline in September (from a 4.9% drop previously).
Personal income edged up 0.1% and personal spending was up 0.4%. Just as important, U.S. consumer confidence index rose in November for the first time in six months, a University of Michigan survey showed. The sentiment index, after revisions, increased to 84.2 from 80.6 in October.
Says Walter Murphy, senior international markets analyst for Merrill Lynch."With what we've seen these last few weeks, we think we'll have decent economic data and earnings over the next few months."
And another report signaled continued strength in the housing market. The Mortgage Bankers Association reported that its market index fell only slightly from 1200.2 in the week ended Nov. 15 to 1131.0 during the week ended Nov. 22, as mortgage activity remains strong. The decline was attributed to a decrease in refinancing activity, says Economy.com.
Not all the data looked so hot. The Fed's latest regional economic report card, known as the beige book, showed business investment weakened and production slumped in October and early November. "It's hard to be impressed yet" by the strength of the recovery, says Trip Jones, senior vice president of Fulcrum Global Partners. Economy.com analyst Andy Kish says the beige book figures were a "sobering reminder" that while the indicators are looking strong, the economy itself is still struggling.
But the market focused on the positive news. In stock trading, both financials and technology posted strong gains. The Dow Jones industrial average was up 255 points, or 2.94%, to 8,931. The tech-heavy Nasdaq composite index jumped 43.5 points, or 3%, to 1,487.9. The broader S&P 500-stock index was up 25.5 points, or 2.8%, to 939.
Few earnings reports were released Wednesday. But tech traders were watching Deutsche Telekom (DT), which named its wireless division leader as the company's new chief executive just as it announced the biggest quarterly net loss in its history, $20.6 billion. Despite the huge loss, the stock's American depository receipts climbed 5.75% in trading.
Sun Microsystems SUNW, Intel (INTC), Oracle (ORCL), Microsoft (MSFT), and AOL Time Warner (AOL) all climbed in Nasdaq trading Wednesday.
Eli Lilly (LLY) also climbed 7.8% higher Wednesday. The company's new drugs for osteoporosis and ADHD received federal marketing approval Tuesday. Despite manufacturing setbacks that continue to plague the company, Prudential Securities raised its earnings guidance on Lilly.
In other drug industry news, Transkaryotic Therapies (TKTX) fell 32%. The biotechnology company said a study showed its Replagal medicine doesn't improve kidney function in patients with a rare metabolic condition. Genzyme (GENZ), which is developing a rival treatment, rose 11%.
According to published reports, House Speaker Dennis Hastert may be helping United Airlines' parent UAL (UAL) secure close to $2 billion in government loan guarantees that would allow the company to avoid seeking bankruptcy protection. The airline says the loan guarantees are necessary for survival.
After a full session Wednesday, the markets will be closed all day Thursday and trading will wrap up early at 1:00 p.m. ET on Friday. No economic data will be reported Friday. On Monday, the market will hear economic news on construction spending and manufacturing (the ISM Index). Next week on Tuesday, Ford Motor (F) will report a sales update.
U.S. Treasuries were solidly lower in price Wednesday in a holiday-shortened session as stocks gained ground. The better-than-forecast data on jobless claims and manufacturing also weighed on the market. After closing for the Thanksgiving holiday, trading will resume Friday in another shortened session.
European markets finished higher Wednesday. In London, the FTSE-100 index was up 73.2 points, or 1.8%, to 4,144. Third quarter GDP growth for the United Kingdom was revised upward to 0.8% from 0.7% compared to the second quarter. Frankfurt's DAX was up 88 points, or 2.77%, to 3,280 on some short covering from recent losses. The Paris CAC index was up 98 points, or 3.07%, at 3,313.
In Asia, stocks ended mixed. Japan's Nikkei 225 Index finished up 51.89 points, or 0.59%, to 8,875.88. Lacking fresh news, traders cited by S&P MarketScope said the market was top-heavy ahead of the 9,000 level for the Nikkei. Sony was down 0.74%, and NTT DoCoMo lost 1.23%. In Hong Kong, the Hang Seng index shed 50.93 points, or 0.51%, 9,944.59.