Stocks continued a gradual advance Thursday, reflecting a surprisingly strong report on business conditions in the Philadelphia area.
The monthly report by the Federal Reserve Bank of Philadelphia is watched closely as an indicator of national economic trends.
Treasury bonds lost ground amid fresh signs of an economic rebound. The yield on 2-year Treasury notes, which moves opposite to the price of the notes, climbed to its highest level since Dec. 16.
Federal Reserve officials attempted to assure investors that they have no plans to boost their short-term interest rate target.
The Dow Jones industrial average rose 26.17, to 9423.68. United Technologies and Caterpillar were among the biggest winners in the 30-stock Dow industrials. The Dow’s health-care stocks–Merck, Procter & Gamble and Johnson & Johnson–led the decliners.
The broader Standard & Poor’s 500 index added 2.97, to 1003.27; the Nasdaq composite index gained 17.01, to finish at 1777.55; the Russell 2000 index of small-company stocks rose 5.36 to 494.82.
After the close of regular trading, shares of retailers Nordstrom and Gap advanced on upbeat earnings reports. In the regular session, retailers Joseph A. Bank, Claire’s Stores and Williams-Sonoma rallied on optimistic earnings reports and outlooks. But Limited Brands fell after the retailer said August sales have been disappointing.
New York Stock Exchange trading volume reached 1.40 billion shares. Nasdaq trading volume totaled 1.70 billion shares. Winners outnumbered losers by nearly a 2-1 ratio on both exchanges.
Oil prices jumped in New York futures trading, reflecting a spurt in gas prices. Oil for October delivery rose 84 cents a barrel, to $31.88. Gasoline for September delivery advanced 9.57 cents a gallon, to $1.0993.
Out of the woods: Money manager Gene Henssler, whose Atlanta-based Henssler Equity Fund has scored above-average returns for the last five years, said evidence for his upbeat outlook includes more generous lending activity at the nation’s banks.
The Federal Reserve also is supplying money to the economy at a heady pace, he said. “Money has been freed up” for business borrowers at banks and businesses are stepping to the loan window, he said.
Until six months ago, bankers were under pressure from federal bank regulators to enforce stiff loan-quality standards and to say “no” to business borrowers, Henssler said.
“If you didn’t lend to the pope, that was it,” he said.
Recently, bankers have relaxed, and loan demand has picked up, according to new Federal Reserve data. But despite four-decade lows in interest rates, the loan demand by businesses lags what it was in the rebound for the recession of the early 1990s.
A Fed survey this month of senior bank loan officers said banks tightening credit standards represented just a net 3.5 percent of banks responding (the percentage of those tightening minus the percentage of those easing standards). That’s down from 8.9 percent in April and a cycle peak of 51.9 percent in March 2001.
Moreover, for the first time since 1998, a few banks reduced the spread between their business loan rates and their cost of funds, a sign of budding loan competition, the Fed reported.
Ten percent of banks reported an increase in loan demand this month, up from zero in April. But nearly 33 percent of banks reported weaker loan demand in August, yielding a net decline in loan demand at 22 percent of banks.
That’s an improvement from a net 39 percent of banks with weaker loan demand in April.
But Moody’s Investors Service recalled that when an economic recovery was under way in mid-1992, the net percentage of banks reporting strong loan demand was positive.
What’s the difference? Job growth rose significantly in the second half of 1992, a desirable trend that has yet to emerge in the current economic rebound, Moody’s said.
Local news: UBS removed its “buy” rating on Aurora-based Cabot Microelectronics, which supplies materials to makers of printed circuit boards. UBS cited the stock’s gain since May. Shares closed down 55 cents, to $65.99, after hitting a 17-month intraday high of $68.20 Wednesday.
