Having put the lead-off hitter on base Monday, Wall Street rapped another single Tuesday, advancing the Dow industrials to their highest level since mid-April.
Tuesday’s upbeat news was broadly based, countering the stock market’s glum sentiment of recent weeks. In turn, Treasury securities swooned on fears a resurgent U.S. economy would spark inflation.
The government reported much better than expected retail sales in April.
Retailers Wal-Mart Stores and J.C. Penney reported strong second-quarter profits. Sears, Roebuck, based in Hoffman Estates, gained $2.89, to $54.89, as Wall Street applauded the company’s move to acquire apparel merchant Lands’ End.
Meanwhile, Robertson Stephens issued a “buy” rating on semiconductor giant Intel, which added $1.63, to $30.15. The index of semiconductor stocks tracked at the Philadelphia Stock Exchange rose more than 6 percent.
After the close of Tuesday’s regular trading session, shares of Applied Materials, a maker of fabrication equipment for the semiconductor industry, rose after it posted surprisingly strong results. The company said new orders soared 51 percent in the latest quarter.
The Dow Jones industrial average jumped 188.48 points, or 1.9 percent, to 10,298.14. On Monday, the Dow added nearly 170 points.
Along with Intel, Home Depot, Wal-Mart, Microsoft and International Business Machines led Tuesday’s Dow rally. Defensive blue chips, including Philip Morris and Johnson & Johnson, slipped.
The Nasdaq composite index gained 66.51 points, to 1719.05. The Russell 2000 index of small-company stocks advanced 12, to 511.72.
New York Stock Exchange volume reached 1.42 billion shares. Winning stocks outnumbered losers by more than 2-1 among NYSE and Nasdaq issues. Nasdaq volume totaled 2.6 billion shares.
After Standard & Poor’s decided to remove it from the S&P 500 index, WorldCom fell 20 cents, to $1.24, on astonishing volume of more than 550 million shares–easily the biggest single-stock daily volume on either the Nasdaq or NYSE markets.
The dollar rebounded from a recent slump. Gold prices fell, curbing a recent rally. But crude oil prices reached eight-month highs, breaking above the $29-a-barrel mark for the first time since Sept. 11.
Crying wolf: Now that federal budget surpluses have been obliterated, a 1995-style political train wreck looms over increasing the debt ceiling.
The legislated ceiling stands at $5.95 trillion. Congress has so far declined to raise the limit, despite increases in military spending, anti-terrorism programs and a multibillion-dollar farm subsidy program.
The huge increases in government spending have been met by declining tax revenues this spring. Treasury market analysts foresee another fiscal showdown in June akin to the stand-off in the fall of 1995 between the Clinton administration and former House Speaker Newt Gingrich.
This time, blame is falling on Senate Democrats, who are said to be too eager to paste the label of fiscal mismanagement on the Bush White House.
“Democrats want to be able to make a statement about the recent pace of spending,” said Tony Cresenzi, chief bond market strategist at Miller Tabek & Co. in New York.
“They want to point out that we’ve reached the debt limit faster because of [last year’s] tax cut.”
Bond market analysts expect the debt ceiling will be raised by late June. But the prospect that Congress could disrupt the market for government securities remains unnerving.
On Tuesday, the Treasury for the second time in two months took several technical steps to avoid breaching the debt limit.
If the ceiling is not increased by the end of June, the government might not be able to pay its bills, including amounts owed on Treasury securities.
“Over the years in Congress, a rather lax attitude has evolved toward the debt ceiling and the risk of default,” said Ward McCarthy of the New Jersey-based Stone & McCarthy Research.
Anthony Karydakis, capital markets economist at Banc One in Chicago, said Treasury market investors have not yet focused on the issue, but attention will jell if the Treasury is forced to postpone its regular 2-year note auction in mid-June.
