Closing Market Report

Star-Bulletin news services

Wall Street rallies
on strong economic data

NEW YORK >> Wall Street put aside its worries over interest rates yesterday and managed a halfhearted rally on the eve of a key Federal Reserve meeting.

The buying was fueled by positive economic data. The Commerce Department reported that construction spending jumped by 1.5 percent in March from February to a seasonally adjusted annual rate of $944.1 billion, the highest level on record. The increase was three times higher than economists expected.

Manufacturing growth slowed slightly in April due to higher costs for materials, according to the Institute for Supply Management's manufacturing index. However, the growth was still considered strong for the month.

Nonetheless, with trading volume light and prices falling from their session highs through the afternoon, the bounce from last week's selling was unlikely to be a signal of an overall turnaround, especially with the markets sensitive to any change in the Fed's stance.

"I don't think this was so much about the economic data, I think the market was just oversold coming into today," said Russ Koesterich, U.S. equity strategist at State Street Corp. "The economic data was good, but not great. With the low volume, this rally is not really convincing."

Advancing issues outnumbered decliners by nearly 3 to 2 on the New York Stock Exchange, where consolidated volume came to 1.97 billion shares, compared with 2.04 billion on Friday.

The Dow Jones industrial average rose 88.43, or 0.9 percent. The Standard & Poor's 500 index gained 10.19, or 0.9 percent, to 1,117.49. The Nasdaq composite index was up 18.57, or 1 percent, at 1,938.72. The Russell 2000 index of smaller companies rose 5.68, or 1 percent, to 565.48.

The price of the Treasury's 10-year note closed up 1/32 point, while its yield fell to 4.50 percent from 4.51 percent Friday. Two-year Treasury notes were unchanged and yielded 2.32 percent.

While a rate hike was not expected at today's meeting, the Fed's statement after the gathering was expected to be thoroughly dissected by Wall Street. As the economy continues to grow at a rapid pace, most investors expect a hike by August to combat inflation.

Warren Buffett, chairman of Berkshire Hathaway Inc., told investors over the weekend the holding company has already shifted its assets in anticipation of rising rates. After its annual meeting this weekend, "A" shares of Berkshire Hathaway fell $490.00 to $92,900.00 per share.

Signs of life in the technology sector helped semiconductor stocks. Global semiconductor sales rose 32.3 percent year-over-year, according to an industry report. Chip maker Intel Corp. gained 31 cents to $26.04.

Sara Lee Corp. announced it has hired former PepsiCo Inc. executive Brenda Barnes as president and chief operating officer. The food producer and apparel maker climbed 29 cents to $23.37.

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