New York – Wall Street soared Thursday, propelling the Standard & Poor’s 500 index and Dow Jones industrials to record highs as bright spots among generally sluggish retail sales allowed investors to toss aside concerns about the health of the economy.
The rally, which gave the Dow its biggest one-day percentage gain in nearly four years, was perhaps surprising given that there was no extraordinary announcement or other catalyst often seen with such a huge gain, and that it came before most companies have announced their second-quarter earnings. The rise also marked a sharp contrast to the start of the week, when stocks fell sharply amid concerns that some hedge funds could succumb to ill-placed bets on the housing sector.
But investors, heartened by signs of a happy and spending consumer, clearly decided to put some money on the table. Though retail sales generally appeared to be crimped last month by higher gasoline prices and a tepid housing market, and the outlook for the coming months was difficult to ascertain, the overall reading wasn’t as dour as some investors expected.
Several reports beat expectations – notably that of Wal-Mart Stores Inc., the world’s largest retailer, which posted a better-than-expected 2.4 percent jump in sales at stores open at least a year.
“It’s relief that things weren’t as bad as people expected,” said Bill Schultz, chief investment officer at McQueen, Ball & Associates, referring to the retailers’ reports and the economy at large.
“We’re maybe getting slower growth but not the fall-off-the- cliff economic scenarios,” he said of investors’ reading of the economy.
But, Schultz said, “I think it is, over the near term, a little bit overdone, certainly on a two-day basis,” referring to the rally.
Given the nearly 400- point swing the Dow has shown this week and the big gains Thursday, a profit-taking session today wouldn’t come as a surprise.
The S&P 500 rose 28.94, or 1.91 percent, to 1,547.70, above its record close of 1,539.18 set June 4.
The Dow shot up 283.86, or 2.09 percent, to 13,861.73; its previous record close, which also came June 4, was 13,676.32.
Thursday’s jump was the biggest one-day percentage gain for the blue-chip index since October 2003 and the biggest single- session point gain since October 2002. The Dow also reached a new trading high of 13,869.94 and saw its 50th record close since the start of October.
The Nasdaq composite index rose 49.94, or 1.88 percent, to 2,701.73; the rise Thursday was the biggest one-day percentage increase since March. The last time the Nasdaq closed at such levels was in February 2001. Still, the index is nowhere near its closing record of 5,048.62, set in March 2000.
Thursday’s report from Wal- Mart, one of the 30 companies that make up the Dow, helped ease some investors’ worries about the health of the consumer ahead of the Commerce Department’s report today on U.S. retail sales.
“This is the first positive month Wal-Mart has had in a while,” said Doug Roberts, chief investment strategist for investment-research company Channel Capital Research, citing one reason for the market’s move higher.
“The market has a split personality. This is the other side of the personality,” he said, referring to the turnaround from sentiment from Monday. “The kind of disaster situation that everybody was preparing for doesn’t seem to be playing out.”
Besides Wal-Mart, Intel Corp. helped push the Dow higher after a Banc of America Securities analyst said the company might turn in better-than- expected second-quarter sales. Intel jumped $1.43, or 5.8 percent, to $26.
Stocks’ ascent Thursday could also reflect so-called short covering. Investors who sell stocks short are betting they will fall; in cases where the stocks rise, such investors are often forced to buy stocks to limit their losses.
Trading is likely to remain volatile while the market awaits the bulk of second-quarter earnings reports.
Analysts have been keeping expectations low – especially after profit warnings this week from cellphone maker Motorola Inc. and retailers Home Depot Inc. and Sears Holdings Corp.
