Tax cut plan
NEW YORK >> Stocks regained some upward momentum today, rising on news that President Bush would sign a tax cut bill into law and on solid earnings from cigarette maker Altria.
Stocks gained after Bush announced he would sign a dramatically reduced compromise version of his tax cut plan. The plan calls for $350 billion in tax cuts, just under half the $726 billion package Bush wanted.
"The tax bill should excite people. ... I think a lot of people said that it wouldn't make it. That generates some enthusiasm," said Ned Riley, chief investment strategist at State Street Global Advisors in Boston.
Advancing issues outnumbered decliners slightly more than 2 to 1 on the New York Stock Exchange. Volume was light.
The Dow Jones industrial average closed the session up 77.59, or 0.9 percent, at 8,594.02.
The broader market was also higher. The Nasdaq composite index rose 17.68, or 1.2 percent, to 1,507.55. The Standard & Poor's 500 index advanced 8.45, or 0.9 percent, to 931.87. The Russell 2000 index rose 4.36, or 1.1 percent, to 415.09.
The price of the Treasury's 10-year note closed up 19/32 point, while its yield fell to 3.33 percent from 3.40 percent yesterday. Two-year Treasury notes were up 1/32 point and yielded 1.33 percent, down from 1.36 percent yesterday.
For most of the week, the market has been vulnerable to profit taking, but today's rally was a return to the big gains that have dominated Wall Street since April, when companies began posting their first-quarter results. Investors were delighted to hear much of corporate America report surprisingly strong profits.
Aside from the tax cut plan, analysts also attributed the buying to better-than-expected first-quarter earnings and the fact that the market was breaking important psychological levels with the Nasdaq rising above the 1,500 level.
"That is the top that we saw in November of last year. The fact that we have seen the potential for this resistance level turning to support is going to get (investors) more excited and keep them in the market," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati.
Meanwhile, Wall Street took in stride a Labor Department report that new applications for state unemployment insurance rose by a seasonally adjusted 7,000 to 428,000 during the week ending May 17. The increase was attributed to businesses closing following tornadoes in the Midwest.
Among today's gainers, tobacco stocks rallied the day after a Florida appeals court threw out a $145 billion verdict against tobacco companies.
Altria climbed $2.75 to $41.05 and was the Dow's biggest winner. Additionally, Credit Suisse First Boston raised its rating on the company, formerly called Philip Morris, to "outperform" from "neutral."
R.J. Reynolds advanced $1.03 to $34.31.
But Lexmark declined $1.40 to $69.95 after Needham & Co. downgraded the printer maker to "sell" from "hold."
Overseas, Japan's Nikkei stock average finished up 0.4 percent. In Europe, France's CAC-40 rose 0.8 percent, Britain's FTSE 100 gained 1.4 percent and Germany's DAX index advanced 1.3 percent.