Year likely to end with modest gains
NEW YORK » Wall Street overcame its recent caution yesterday, with a raft of acquisitions propping up stocks and lower-than-expected gross domestic product growth easing inflation fears.
Acquisitions in the technology and pharmaceutical industries promised to reinvigorate those lagging sectors. Google Inc., Seagate Technologies and IBM Corp. all announced major purchases, while Allergan Inc. said it will buy Inamed Corp.
And while final third-quarter GDP was lower than anticipated, with the economy growing at an annualized rate of 4.1 percent instead of the expected 4.3 percent, investors welcomed the news as another sign that the Federal Reserve would be hard pressed to continue raising interest rates. The 4.1 percent growth rate was still considered strong.
Yet despite the good news, stocks still saw a downturn in afternoon trading, giving up more substantial gains from earlier in the session. While stocks are not expected to give up the year's modest gains, a further substantial push higher remains in doubt.
"We're definitely picking up some momentum going into year's end, but that's not really translating into any sense of urgency," said Hugh Johnson, chairman and chief investment officer at Johnson Illington Advisors in Albany, N.Y. "People are content to hold on to some cash and not be fully invested."
The Dow Jones industrial average rose 28.18, or 0.26 percent, to 10,833.73. The Dow had been more than 94 points higher earlier in the session.
Broader stock indicators also moved higher. The Standard & Poor's 500 index climbed 3.17, or 0.25 percent, to 1,262.79, while the Nasdaq composite index added 9.24, or 0.42 percent, to 2,231.66.
Bonds continued the previous session's sell-off, with the yield on the 10-year Treasury note rising to 4.49 percent from 4.47 percent late Tuesday. Crude oil futures rose yesterday after the U.S. government's weekly petroleum report showed a decline in domestic inventories of distillate fuel, which include heating oil and diesel. February light sweet crude rose 47 cents to settle at $58.56 a barrel on the New York Mercantile Exchange.
With just six trading days to go before 2006, the year likely will end with modest gains, as opposed to 2004's strong year-end rally. However, that could make early 2006 a little better.
"We sold off pretty heavily in January coming off last year's rally, and I don't think we'll see as much of that in 2006," said Joseph Battipaglia, chief investment officer at Ryan Beck & Co.