Stocks Stage Late-Session Reversal
Stocks charged ahead on Thursday after spending most of the session in the red as investors decided to ignore discouraging economic reports and focus on some bargain prices for equities. Wall Street is banking on hopes that dramatic cuts made in interest rates combined with an economic stimulus package now wending its way through Washington will help companies pull out of a slump.
Boeing Co. (BA ), the aerospace giant, was one of the companies that led the Dow Industrials higher as the company is expected to benefit from a renewed interest in military spending.
But technology stocks were the biggest gainers, with the Nasdaq composite index gaining 2.53%, or 43.79 points, to 1775.33. The Nasdaq, along with the rest of the market, had spent most of the session in the red before swinging into the positive in the late afternoon.
The comeback rally came despite some rather dismal corporate score cards released on Thursday. Goodyear Tire & Rubber Co. (GT ) said its third-quarter earnings dropped as September 11 effects further depressed already soft markets.
Telecommunications company WorldCom Inc. (WCOM ) said its third quarter profits dropped 60%, citing pricing pressures, economic weakness and increased competition.
And chemical giant Dow Chemical Co. (DOW ) said its third-quarter net income dropped 84%, blaming the slowing economy and weak demand.
Economic data showed the U.S. economy remains wobbly. U.S. durable goods orders tumbled 8.5% in September while economists had been expecting only a 1.0% decline, says Standard & Poor's economic research unit MMS. The data reflected severe supply disruptions following the September 11 terrorist attacks, particularly in the aircraft industry, vehicles and high-tech equipment.
News from the labor front was discouraging as well. The number of Americans filing for the first time for unemployment benefits rose by 8,000 to the 504,000 in the week ended October 20. Particularly alarming was news that continuing claims rose an additional 56,000 to 3.65 million, which is the highest level in about 18 1/2 years and suggests that claimants are having a difficult time finding new employment.
And U.S. existing home sales plunged 11.7% to a 4.89 million annual rate in September from a 5.54 million pace in August. This is the first time this year that the pace has fallen below the 5.0 million rate and reflects the immediate negative impact of the terrorist attacks, MMS said.
Adding to the uncertainty were new reports that the anthrax threat is spreading with discoveries of the deadly bacteria in new areas of the Capitol.
Nevertheless, the Dow Jones industrial average climbed 117.28 points, or 1.25%, to 9,462.90.65. The broader Standard & Poor's 500 index added 14.86 points, or 1.37%, to 1,100.06.
U.S Treasuries ended higher on this morning's weak economic numbers. Economists said the soft economic data could encourage the Federal Reserve to lower interest rates again at its next meeting.
European markets closed lower. In London, the Financial Times-Stock Exchange 100 index was off 81 points, or 1.57% at 5,086.60 as U.S. stocks skid on weak economic data that diminish perception America would rebound quickly. The European Central Bank also refused to cut rates at today's meeting as it is still worried about inflation.
In France, the CAC 40 index was down 107.90 points, or 2.41%, to 4,715.60.
In Germany, the DAX index was off 96.22 points, or 2.00% to 4,715.60, also on the Central Bank leaving rates unchanged. Germany's Finance Minister said the slumping German economy did not need any fiscal stimulus even though the government lowered its forecast for economic growth this year to 0.75% from 2%.
In Asia, Japan's Nikkei 225 average gained 77.95 points, or 0.72%, to 10,880.10 as banks rose for a second day on improved sentiment following signs of progress in expanding the Resolution and Collection Corp.'s role in cleaning up Japan's bad debt problem. Markets in Hong Kong were closed in observance of the Chung Yeung Festival.