NEW YORK >> The Dow industrials closed above 11,000 for the first time in eight months, soaring more than 340 points on hopes that lower interest rates will revitalize economic growth.
The blue-chip index jumps 343By Amy Baldwin
to break through a key resistance
barrier while the Nasdaq rises 81
The Federal Reserve yesterday reduced interest rates by half a percentage point in the fifth cut this year, raising investors' hopes that the economy and earnings will turn around in the second half of the year.
The Dow Jones industrial average soared 342.95, or 4 percent, to 11,215.92, closing above the 11,000 level for the first time since Sept. 14 with its fifth-biggest point gain ever.
The Nasdaq composite index rose 80.86, or 3.9 percent, to 2,166.44, and the Standard & Poor's 500 index advanced 35.55, or 2.9 percent, to 1,284.99.
Analysts attributed the sharp upturn largely to professional money managers pumping the cash they've been holding onto back into the market.
"The economy will recover, we're not in terrible shape," said Charles Pradilla, chief investment strategist for SG Cowen Securities.
Even as many big companies are still announcing layoffs and other cost-cutting efforts, Pradilla said the economy does have some brighter spots.
"We are not falling off a cliff here," he said. "Housing is still very strong. We are seeing some strong auto sales. ... This is not an economy that is in a rout, and we are going to see some positive things from what the Fed is doing."
Historically, the market's major indexes turn higher about six months after the Federal Reserve starts to lower interest rates. The central bank made its first cut Jan. 3.
"This thing is going to turn and every portfolio manager out there has got to play," Pradilla reasoned.
"We'll see economic recovery later this year, definitely by the fourth quarter, with profits starting to pick up in the first quarter," said Edgar Peters, chief investment officer of PanAgora Asset Management in Boston, which manages $16 billion. "Stock prices will react before earnings are reported."
Advancers outnumbered decliners 2 to 1 on the New York Stock Exchange, with 2,063 up, 1,027 down and 205 unchanged. Volume was 1.35 billion vs. 1.04 billion yesterday. The NYSE composite index rose 15.30 to 62.73, the American Stock Exchange composite index gained 7.66 to 954.09 and the Russell 2000 index advanced 7.58 to 497.21. The Treasury's 10-year note rose 18 to 961932; its yield fell 2 basis points to 5.45 percent. The 30-year bond was unchanged at 9314; its yield stayed at 5.86 percent.
A milder-than-expected read on inflation also lifted Wall Street's mood. The Consumer Price Index, a key inflation indicator, rose 0.3 percent in April, less than the 0.4 percent gain expected by economists, according to the Labor Department. Tame inflation could clear the way for the Fed to continue its series of aggressive rate cuts, analysts said.
Among the largest Nasdaq stocks, Cisco rose $1.26 to $20; Intel climbed $1.19 to $28.39; Microsoft gained 89 cents to $69.16; and Sun Microsystems rallied $1.22 to $18.67.
Krispy Kreme Doughnuts Inc. surged $7, or 14 percent, to $56.40 after the company reported fiscal first-quarter profit that topped expectations and lifted its earnings forecasts for this year and next.