Dow Closes Above 10,000

Bullish interepretation of the Federal Reserve's minutes sparked buying across a number of sectors

Stocks closed higher Thursday -- pushing the blue chip Dow average above the 10,000 mark -- helped by a bullish interpretation of the minutes from the Federal Reserve's Oct. 28 meeting. The news helped spark more buying after the stronger than expected report on retail sales.

The Dow Jones industrial average rose 86.3 points, or 0.87%, to a fresh 52-week high of 10,008.16. The broader Standard & Poor's 500 index was up 12.16 points, or 1.15%, at 1,071.21. The tech-heavy Nasdaq Composite index gained 37.67 points, or 1.98%, to 1,942.32.

One of the sparks for the afternoon rally was the minutes from the Federal Open Market Committee's Oct. 28 meeting, which were released at 2 p.m. (ET), says Standard & Poor's MarketScope. The minutes show that the Fed members felt they could wait for "definitive signs" that the economy was on a sustainable growth path before raising interest rates. The Fed expects inflation will remain "very slow" over the next 2 years, with the labor market not likely to be fully recovered until late in 2005.

"Monetary policy changes do work with a lag, but two years gives the Board a good bit of time before anything absolutely has to be done," notes economic research outfit MMS International. "Rate hike expectations will be pushed back."

In other economic news, U.S. retail sales rose 0.9% in November to $322.4 billion as new car purchases rebounded and consumers continued to buy electronics and furniture, the Commerce Department said. The November gain was stronger than forecast, and followed no change in October. Excluding autos, retail sales rose 0.4%, vs. October's 0.4% rise.

Initial jobless claims rose by 13,000 to 378,000 in the week ending Dec. 6 -- the highest in six weeks, the Labor Department reported. The report was weaker than expected. David Wyss, chief economist for Standard & Poor's, says the rise is "somewhat ominous," as labor market conditions are beginning to resemble those of the summer, when claims fell but then bounced back in the fall. However, notes Wyss, the holiday seasonals are "always tricky, so this could be a seasonal fluke."

Also, November import prices rose 0.4%, while export prices were up 0.5%.

Two reports are coming out Friday: Factory goods and consumer credit.

On Thursday, gains stretched across many areas of the market, including technology, homebuilding, and retailing. Tech stocks rallied after researcher IDC raised 2003 PC global shipment forecast to 11% from 8% based on strong holiday sales, according to Standard & Poor's MarketScope.

There was also some upbeat earnings news in the tech sector. Atmel (ATML ) raised fourth-quarter revenue guidance to sequential growth of 7% to 10%, vs. previous guidance of 3% to 6% growth. It says gross margins are also on track to be stronger than expected. The company expects it could reach operating breakeven this quarter.

Triquint Semiconductor (TQNT ) says that due to strong bookings, especially for wireless phones products, it raised its fourth-quarter guidance to breakeven-to-slight profit on revenue of $85 million to $87 million. This compares to previous guidance of a loss of 2 cents to 4 cents per share on revenue of $80 million to $83 million.

In other news, Goodyear Tire & Rubber (GT ) was lower after the company discovered more accounting problems. The company says it will delay until next year the filing of amended 2002 10K-A do to identification of possible improper accountingg issues in Europe. The delay could impact the company's ability to satisfy certain obligations to United Steelworkers of America, Goodyear says.

One tech stock falling was Unisys (UIS ). At its Dec. 10 analyst meeting, the company forecast mid single-digit 2004 revenue growth, and 20% EPS growth, excluding pension accounting. Morgan Stanley says the analyst meeting was disappointing, and it cut its estimates.

Another loser was Ciena (CIEN ), which fell after the communications equipment maker reported a fourth-quarter loss of 24 cents per share, narrower than expected and up from a $1.75 loss (GAAP) a year ago, on 14% revenue rise. The company sees first-quarter revenue flat-to-10% higher sequentially. S&P maintains a hold ranking on the stock.

Elsewhere in telecom, AT&T (T ) shares rose after the company announced a major initiative to deliver full complement voice over Internet protocol (VoIP) services to business customers and consumers in 2004.

Neoforma (NEOF ) shares fell after it says it expects 2003 results to be at the low end of previously announced range of $10.5 million to $13.5 million net income (GAAP) on $80 million to $83 million adjusted revenue.

Treasury Market

Amid a strong pickup in volume, Treasuries moved higher on the "dovish" FOMC minutes. Short-sellers, having established positions following the poor 10-year note auction, were scrambling to cover, says MMS International.

The 10-year Treasury note, which had been lower in the wake of this morning's stronger than expected November retail sales report, was able to reverse direction and finish with good gains on the day after the FOMC minutes were released.

World Markets

European stock markets finished mixed. London's Financial Times-Stock Exchange 100 index fell 4.1 points, or 0.09%, to 4,331.3 on some profit taking. Investors were weighing Chancellor of Exchequer Brown's comments that Britain's economic growth is getting more balanced, that inflation and interest rates will remain low, and that he will not rule out another tax increase.

In Paris, the CAC 40 was up 29.05 points, or 0.84%, to 3,467.9 as Bank of France indicators shows the economy in the fourth quarter is exected to grow at a 0.5% rate. Germany's DAX index was up 37.93 points, or 0.99%, to 3,858.85 even though car sales fell. Some traders were encouraged that German November CPI rose only 0.2%. Exporters were a bit encouraged that the euro was lower at $1.2263 vs. the dollar after the recent surge to a record high.

Asian markets finished higher Thursday. In Japan, the Nikkei 225 index rose 164.58 points, or 1.66%, to 10,075.14. In Hong Kong, the Hang Seng index advanced 156.2 points, or 1.26%, to 12,554.58.

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