Closing Market Report
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Investors flocking to blue-chip stocks
By Joe Bel Bruno
Associated Press
NEW YORK » Wall Street extended its October rally yesterday as investors grew more confident about upcoming earnings reports and as a decline in oil bolstered hopes for higher consumer spending. The Dow Jones industrials crossed 12,100 for the first time and reached another record high close.
Dow component Wal-Mart Stores Inc., which pleased investors by announcing plans to cut capital spending to improve profits, helped the blue chips to their new high. The Dow's record came just three trading days after its first move past 12,000.
Strength from International Business Machines Corp., Hasbro Inc., and Xerox Corp. also fed the advance. Just halfway through the third-quarter earnings season, companies' generally upbeat reports have given investors a renewed sense of security about the future.
"The blue chips have absolutely outperformed most markets, and this was an extension of that trend," said Steven Goldman, chief market strategist at Weeden & Co. "I don't think things are overdone. Investors are looking ahead thinking an economic slowdown is forthcoming, and its safer to get into household names and not new companies."
Blue chips resumed a three-month rally yesterday after stalling Friday; the Dow had already risen 233 points in October before yesterday's trading. The Dow Jones industrial average rose 114.54, or 0.95 percent, to close at 12,116.91.
The Standard & Poor's 500 index rose 8.42, or 0.62 percent, to 1,377.02, and the Nasdaq composite index rose 13.26, or 0.57 percent, to 2,355.56.
Yesterday's gains came despite some concerns about the Federal Reserve's two-day meeting on interest rates, which starts today. Policymakers are expected to leave interest rates unchanged, though they could sound a hawkish tone in their accompanying economic assessment because of recent signs of rising inflation.
Treasury bonds fell on speculation the Fed will keep its benchmark rate at 5.25 percent, which is still at its highest level in more than five years. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.83 percent form 4.79 percent on Friday.
Wal-Mart, the world's largest retailer, said it will be more selective about where it will open stores, though it still plans 600 new locations next year. The retailer, which has been pushed by Wall Street to be more prudent in its expansion, was the Dow's biggest advancing stock.
The company said in a meeting with investors that it plans to bring costs in line with a slowdown in its sales and earnings growth.