NEW YORK – Wall Street began the week with a strong start today as better-than-expected profits at Citigroup Inc. and a healthy increase in consumer spending renewed investors’ optimism about the economy. The Dow Jones industrials showed gains of about 100 points.
Earnings reports begin arriving at a steady clip this week, giving investors fresh indications about companies and the overall economy. This week nearly half the 30 Dow component companies report results.
While investors have been girding for a slowdown in growth of corporate profits, they are hoping consumer spending will remain robust. The Commerce Department today reported that consumers spent strongly last month, sending retail sales up by about 0.7 percent. The figure was close o what analysts predicted, and up from a revised 0.5 percent increase in February.
Investors were also pleased by news of a buyout of SLM Corp., the student lender better known as Sallie Mae. SLM agreed today to be sold to two private investment funds and J.P. Morgan Chase & Co. and Bank of America Corp. for $25 billion, or $60 per share. Sallie Mae rose $8.28, or 17.7 percent, to $55.04.
But analysts warned that Wall Street’s good humor was unlikely to last. Robert N. Schaeffer, portfolio manager at Becker Value Equity Fund, contends that a pop in stocks is typical when earnings reports begin to flow in and are better than expected.
“The positive reaction to the earnings tends to be short-lived traditionally,” he said. “There is also a tendency for companies with better earnings reports to report early. The companies that are going to disappoint tend to drag their feet a bit.”
In early afternoon trading, the Dow Jones industrial average rose 97.76, or 0.78 percent, to 12,709.89. The Dow’s increase put the blue chip average back above where it stood before the major U.S. indexes fell more than 3 percent on Feb. 27 as part of a worldwide selloff. The Dow is within roughly 80 points of its all-time closing high of 12,786.64, reached Feb. 20.
Broader stock indicators also rose. The Standard & Poor’s 500 index rose 13.44, or 0.93 percent, to 1,466.29, a six-and-a-half-year high. The Nasdaq composite index rose 21.10, or 0.85 percent, to 2,513.04.
