Investors heartened by retail sales jump
NEW YORK» Wall Street rebounded smartly yesterday, propelling the Dow Jones industrial average up 187 points as bond yields eased and economic data came in stronger than expected.
The Dow saw its biggest point gain since July 19, 2006, and more than made up for a plunge a day earlier that was fueled by the benchmark 10-year Treasury note yield's surge to five-year highs. Rising bond yields amid inflation concerns had been pummeling stocks since last week.
Though rate worries still dog investors, their confidence perked up after the U.S. Commerce Department said yesterday that retail sales jumped 1.4 percent in May.
The rise, which followed a 0.1 percent decline in April, was the highest in 16 months and double the increase analysts expected. It signaled to the stock market that consumers plan to keep spending and pushing the economy along, even as gas prices and other costs increase.
Investors were also pleased about the Federal Reserve's Beige Book report, which said the U.S. economy kept expanding at a moderate pace in the first part of the second quarter, and that various regions around the United States "did not indicate an increase in overall price pressures." The central bank's next meeting on interest rates will be held in two weeks.
"This is a classic demonstration of the market's continuing denial of risk," said Robert Brown, chief investment officer at Genworth Financial Asset Management, contending that while the economic news is generally favorable, investors aren't pricing in adequate amounts of risk. "It wants to ignore the negative news and focus solely on the positive."
The Dow jumped 187.34, or 1.41 percent, to 13,482.35, after bouncing around earlier in the session as investors weighed the possibility of rising interest rates. The index is still 193.97 points, or 1.41 percent, below its record close of 13,676.32 reached June 4.
Broader stock indicators also advanced sharply. The Standard & Poor's 500 index rose 22.67, or 1.52 percent, to 1,515.67, and the Nasdaq composite index rose 32.54, or 1.28 percent, to 2,582.31.
The S&P 500 and Nasdaq indexes both saw their largest point gains since March 21.
Bond yields spiked early yesterday before falling back as investors re-entered the market to take advantage of low prices, which move in the opposite direction of yields. The yield on the benchmark 10-year Treasury note slipped to 5.21 percent from 5.295 percent Tuesday.
Advancing issues outnumbered decliners by more than 4 to 1 on the New York Stock Exchange, where consolidated volume came to 3.02 billion shares, up slightly from 2.99 billion Tuesday.
The Russell 2000 index of smaller companies rose 10.82, or 1.32 percent, to 832.54.
Light, sweet crude climbed 91 cents to $66.26 per barrel after the government reported that U.S. crude oil stocks increased by a modest 100,000 barrels last week, while gasoline inventories were flat.
The dollar was mixed against other major currencies, and gold prices slipped.
In corporate news, Blockbuster Inc. rose 32 cents, or 8.1 percent, to $4.27 after a Citigroup analyst praised the company's plan to offer less expensive online rentals.