Nasdaq hits 5-year high as Wall Street rebounds
NEW YORK » Wall Street rallied back yesterday as investors scared off by the Federal Reserve's assessment of the economy in the previous session regained their confidence and bid stocks higher.
The Nasdaq composite index reached a five-year high as investors focused on technology and smaller company stocks. The advance reflects investors' overall optimism about the economy and corporate earnings, although many remain concerned that rising borrowing and energy costs could weigh on both, analysts said.
"I think after yesterday's sell-off, when we turned off the lights and came back in the morning, we got a chance to say, 'You know what? We've overdone it here,'" said Arthur Hogan, chief market analyst at Jefferies & Co.
Stocks sold off sharply Tuesday, pulling the Dow Jones industrials down 95 points, after the Fed suggested more interest rate hikes would be needed to head off inflationary pressures. The Fed's comments accompanied its decision to raise its benchmark rate a quarter percentage point to 4.75 percent.
The Dow yesterday rose 61.16, or 0.55 percent, to 11,215.70. The Dow was held back somewhat by General Motors Corp., which fell after it announced earnings restatements in its mortgage arm.
Broader stock indicators also were higher. The Nasdaq gained 33.32, or 1.45 percent, to 2,337.78, its best close since Feb. 16, 2001, when it closed at 2,425.38. The Standard & Poor's 500 index added 9.66, or 0.75 percent, to 1,302.89.
Advancing issues outnumbered decliners by nearly 8 to 3 on the New York Stock Exchange, where preliminary consolidated volume came to 2.22 billion shares, compared with 2.21 billion traded on Tuesday.
The Russell 2000 index of smaller companies rose 12.90, or 1.72 percent, to 764.17.
"Clearly yesterday I think there was a response to where the Fed was. There was a hope that they (the Fed) would talk about bringing an end to rate increases, that a balance had been achieved," said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co. "They didn't get that, but it's not cataclysmic because you still have the broader picture."
The rebound in stocks came despite another boost in crude oil prices, which rose 38 cents to settle at $66.45 a barrel on the New York Mercantile Exchange.
Investors are still concerned that rising bond yields will siphon away interest in stocks. Bond yields, which shot higher Tuesday, rose slightly to 4.80 percent.
"What we're seeing here is a market that's just waiting to assess economic data later in the week and, of course, moving into the earnings season," said Peter Cardillo, chief market analyst at S.W. Bach & Co.