Jewish World Review

JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
James Glassman
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
David Limbaugh
Michelle Malkin
Jackie Mason
Chris Matthews
Michael Medved
Kathleen Parker
Wes Pruden
Sam Schulman
Amity Shlaes
Roger Simon
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports

Major stock indexes soar to highest closes in a year | (KRT) It was just a dollop of good economic news coming out of the Empire State on Monday, but it had a huge impact on the stock market.

Investors want to see some evidence that the U.S. economy is recovering, and they got it with the release of a survey of New York manufacturing. It showed improvement way beyond expectations.

"I didn't know there was much manufacturing left in the New York area, but just the slightest evidence that the economy is improving and stocks take off," said Henry Herrmann, chief investment officer at Waddell & Reed, a mutual fund company in Overland Park, Kan. "I think it's a heck of a stretch to take this survey and say the economy is improving, but that's what happened."

The three major stock averages all surged more than 2 percent Monday - their highest closes in a year. Stock gains have been huge since the market hit its bear market lows last October. The Dow Jones industrial average has gained 27 percent; the Standard & Poor's 500 index 30 percent; and the Nasdaq composite index 45 percent.

"The Federal Reserve has just been so aggressive in trying to stimulate the economy," Herrmann said. "It is bound and determined to get things moving again, so there is this faith that the economy will show strength, and that is reflected in the market."

The Dow gained 201.84 points Monday, or 2.2 percent, to close at 9318.96. It is up 11.7 percent for the year so far.

The S&P 500 was up 22.13 points, also 2.2 percent, to 1010.74, and is up 14.9 percent this year. It's the first close over 1000 for the S&P since last June.

The Nasdaq composite index scored a 40.09-point gain, or 2.5 percent, to close at 1666.58. It is up 24.8 percent this year.

The tone for the day was set in early trading with the release of a Federal Reserve Bank survey that showed manufacturing in the New York area soared beyond expectations. The factory index rose to 26.8 in June from 10.6 in May; economists were expecting it to fall to 8.8.

Readings greater than zero indicate the majority of manufacturers reported an improvement in business. The report may foreshadow a general strengthening in U.S. manufacturing.

"Ordinarily, this report doesn't capture investors' attention, but they are looking for any sign that the economy is coming back to life," said Hugh Johnson, market analyst at First Albany Corp.

By noon the Dow was up 150 points, and it never relented. Stocks were also helped along by a positive analyst report on Yahoo Inc. Its stock price rose almost 7 percent to $30.66.

All 30 Dow stocks advanced, including Boeing Co., which increased $1.07 to $36.41 after the airline manufacturer said it expected a $5.2 trillion market for new aviation services over the next 20 years, the Associated Press reported.

General Electric Co., another Dow component, rose 69 cents to $31.34 after the diversified company reached a tentative four-year agreement with two of its largest labor unions regarding wages, pensions and benefits, according to AP.

Russ Labrasca, regional managing director for Wells Fargo private client services in Dallas, said another important component to the rally is the changing of investor psychology.

"Emotional momentum continues to mount," Labrasca said. "Investors look back over the last couple of months, and they are beginning to ask if they have missed the rally, and they want to get in."

Also, stocks look like a good alternative, he said, to such vehicles as the two-year U.S. Treasury bond, which is yielding just over 1 percent, or the 10-year note, which is yielding about 3 percent.

Labrasca and many other market experts believe that after such a dramatic run-up this year, stocks could pull back for a time, but there's more rally to come if the economy doesn't stall.

Paul Desmond, president of Lowry's Reports Inc. in North Palm Beach, Fla., said he could foresee a 5 percent to 10 percent market correction in the short run, but "we think this is the beginning of a substantial advance."

He said this three-month rally without a pullback is unusual, and the longer it goes without a correction, the deeper the downturn will be. But overall he's turned very bullish.

"Investors have had a change of heart about how the world looks," Desmond said.

Appreciate this type of reporting? Why not sign-up for the daily JWR update. It's free. Just click here.

Comment by clicking here.


© 2003, Distributed by Knight Ridder/Tribune Information Services