Wall Street barreled higher Friday, as surprisingly strong reports on new-home sales and durable goods orders bolstered investors’ hopes for a sustainable economic recovery.
The Dow Jones industrial average surged 172.06 points, or 1.9 percent, to 9284.57. It was the Dow’s biggest one-day point increase since June 16, when it gained 201.84 points. All 30 Dow stocks advanced.
The broader market also rose. The Standard & Poor’s 500 index added 17.08 points, or 1.7 percent, to 998.68. The Nasdaq composite index gained 29.28, or 1.7 percent, to 1730.70.
All three indexes finished higher for the week. The Dow rose 1.0 percent, the Nasdaq advanced 1.3 percent, and the S&P gained 0.5 percent.
“People came in in the morning thinking `sell,’ and once they looked at the economic data, they realized it was better than expected,” said Adam Tracy, director of listed trading at Thomas Weisel Partners.
Investors were heartened by two reports from the Commerce Department that showed an unexpectedly robust manufacturing rebound in June and record new-home sales in the same month.
“A lot of investors were worried about whether the economy is picking up,” said Brian Williamson, an equity trader at the Boston Company Asset Management. “But the [reports] were pretty good, so that gives investors a little confidence to get back into the market.”
Trading has been choppy in recent days as investors sift through the second-quarter earnings season. Analysts say investors are hoping to find strong evidence that the economy is firmly back on track.
“The economic data overall has been pretty good,” said Barry Berman, head trader for Robert W. Baird & Co. “But there’s a lot of good and bad earnings reports leading to day-to-day volatility.”
About two-thirds of the companies in the S&P 500 have reported second-quarter results. On average, earnings have been 6.2 percent higher than estimates, causing many analysts to ramp up their expectations for the second half of 2003. Historically, companies in the index exceed the average estimate by 2.8 percent, according to Thomson Financial/First Call.
“We’re very encouraged by the tone of this market,” said Lee Kopp, president of Kopp Investment Advisors in Edina, Minn. “We’re getting pretty positive feedback” from companies that have reported results.
Few barriers to rally
On Friday, even some companies reporting bad news advanced.
Alcoa, a Dow component, increased 87 cents, to $26.71, despite Thursday’s disclosure by the aluminum-maker that interruptions at two of its plants would reduce earnings in the second half of the year by $15 million to $25 million.
Pfizer rose 49 cents, to $33.04, even though the drug company reported a loss of $3.59 billion due to nearly $6 billion in expenses for its acquisition of Pharmacia.
Enginemaker beats outlook
Cummins surged $7.22, to $45.16. The 19 percent jump was the second-largest in the S&P 500. The company said second-quarter profit was almost triple the average analyst forecast, buoyed by higher sales of filters and engines for pickup trucks.
That lifted other enginemakers, including Warrenville-based Navistar International, which added $2.67, or 7.4 percent, to $38.50.
Gateway added 46 cents, or 12.5 percent, to $4.14. The computer-maker’s quarterly report and projections, released after Thursday’s close, exceeded Wall Street estimates.
Decliners included Internet auctioneer eBay, which fell $3.50, to $112.24, despite posting record profits after Thursday’s close. The company’s revised growth projections were not as bullish as many investors had hoped.
