Closing Market Report

Star-Bulletin news services

Wednesday, December 26, 2001

Improved holiday sales
spur stock market rally

By Lisa Singhania
Associated Press

NEW YORK >> Stronger-than-expected holiday sales at Wal-Mart and Yahoo! sent stocks climbing today as investors allowed themselves to feel a little more optimistic about consumer spending and in turn, the economy.

But Wall Street's enthusiasm faded late in the session, frustrating expectations of a big post-Christmas rally.

Escalating tension between India and Pakistan and the release of excerpts on the Arabic-language Al-Jazeera television network of a new Osama bin Laden video tape also weighed on the market.

"This is still a good rally," said Al Goldman, chief market strategist at A.G. Edwards & Sons Inc. "But we've come awful far, awful fast. And when people saw the Dow up more than 100, they started selling to take profits."

The Dow Jones industrial average closed up 52.73, or 0.5 percent, at 10,088.07, after rising as much as 133 earlier in the session. Broader stock indicators also finished higher, despite some late afternoon selling. The Standard & Poor's 500 index gained 4.72, or 0.4 percent, to 1,149.37. The technology-focused Nasdaq composite index rose 16.22, or 0.8 percent, to 1,960.70.

Advancers led decliners 2 to 1 on the New York Stock Exchange, with 1,970 up, 1,179 down and 172 unchanged.

Volume was 790.14 million shares vs. 439.03 million shares Monday when the U.S. markets closed early for the Christmas holiday. Wall Street was also closed yesterday. The relatively low volume made stocks more susceptible to sharp gains or losses since there were fewer prospective buyers or sellers.

The NYSE composite index rose 2.58 to 588.63, the American Stock Exchange composite index gained 9.27 to 843.18 and the Russell 2000 index rose 4.38 to 490.19.

The Treasury's 2-year note fell 532 to 99 1832; its yield gained 8 basis points to 3.22 percent. Prices and yields move in opposite directions.

The 10-year note fell 1432 to 98 1732; its yield rose 6 basis points to 5.20 percent. The 30-year bond fell 1932 to 97 34; its yield rose 4 basis points to 5.53 percent.

Wal-Mart Stores rose $1.02 to $58.15 after reporting sales from Thanksgiving through Christmas Eve were higher than expected.

Investors also rewarded Yahoo!, sending it up 84 cents to $17.51 after the online company reported holiday sales rose 86 percent from the previous year. The enthusiasm spread to, which rose $1.27 to $11.10, on hopes that its results would improve, too.

Internet sales between Nov. 19 and Dec. 23 climbed 34 percent to $6.32 billion from $4.7 billion a year earlier, according to Inc., which tracks transactions at 2,000 online sellers. Same-store sales at traditional retailers are expected to rise 1.5 percent, the smallest holiday sales gain since at least 1986, according to Bank of Tokyo-Mitsubishi Ltd.

"The Internet is more significant in people's lives and as people use and trust the Internet more they'll buy more on line," said Rob Solomon, general manager of Yahoo's shopping unit.

The news indicated that, despite one of the most disappointing pre-holiday sales season in years, consumers are still spending.

"Christmas sales haven't been spectacular but what these new numbers are telling you is that they may not have been as terrible as feared," said Larry Wachtel, market analyst for Prudential. "I think that's helping sentiment."

Tech stocks also climbed, including those companies with that depend on computer sales for business. Gateway advanced 17 cents to $7.54, while Intel rose 27 cents to $32.29.

Energy stocks were higher on news that OPEC expected to approve a reduction in output by week's end, a decision that likely would help stabilize sagging oil prices. ExxonMobil gained 60 cents to $39.60.

Still, Wall Street was closely watching political tensions between India and Pakistan. Some fear the two nuclear-armed nations are headed for war. U.S. troops also remain in nearby Afghanistan.

Aside from political conflicts or the possibility of more terrorist attacks, most analysts expect the remaining trading sessions in 2001 to be subdued. Most fund managers already have finished making year-end adjustments to their portfolios and many investors have completed any tax selling.

"Christmas and New Year are historically a good time for the market," Goldman said.

Even if Wall Street gets what's affectionately known as a Santa Claus rally -- a spurt of strong buying that is able to sustain itself -- the major indexes will likely end 2001 below where they started. Although stocks have rebounded sharply from their post-terror attack lows, the market has struggled to move and stay much higher. The Dow has traded around the 10,000 level, while the Nasdaq has hovered at about 2,000.

Overseas, Japan's Nikkei stock average slipped 0.6 percent. Britain's FT-SE 100, France's CAC-40 and Germany's DAX index were closed for a holiday.

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