Dow witnesses its best day since July, 2006 on strong retail data and bullish Fed outlook
US stocks rallied today, Wednesday, 13 June, 2007 as market got a break from rising bond yields. Falling interest rate and Fed’s Beige Book portraying a moderate growth of the economy gave the stocks a major boost today erasing all of yesterday’s loss.
The yield of the 10-year Treasury note fell to 5.22% after hitting a five-year high yesterday at 5.26%. In addition, the Commerce Department came out with a much better-than-expected report on retail sales for May.
Twenty-nine out of the 30 Dow stocks closed higher for the day. The Dow Jones Industrial Average soared by a huge 187.34 points to close at 13482.35. Nasdaq rose 32.54 points to close at 2582.31 and S&P 500 went up by 22.69 points to close at 1515.67.
Alcoa, Boeing, Intel, GM, Caterpillar and Citigroup were the major Dow winners today. All 10 economic sectors posted hefty gains while only four of the 147 S&P 500 industry groups closed lower.
In the post lunch session, The Beige Book showed that manufacturing activity was up in most districts while the majority of the 12 Fed regions also reported that overall wage pressures do not seem to be rising, even though hiring picked up in late April through May.
Today’s triple digit gain was the best day for Dow since July, 2006. For Nasdaq, it was the best day since March, 2007.
Boeing, Caterpillar and Alcoa - each rise more than 2%
When market opened in the morning, a sense that stocks are oversold gave buyers the green signal right out of the gate. A report showing that retail sales were surprisingly strong in May was an added good piece of news.
The Commerce Department reported that retail sales rose 1.4% in May - a healthy change from the revised 0.1% sales decline in April. It was also more than double what economists had predicted. Retail sales excluding automobiles rose 1.3% for the month. It was the strongest data in 16 months.
A reversal in Health Care sector removed some notable leadership during the afternoon hours. But stocks picked up momentum in the final couple hours of trading, mainly after the Beige Book release.
Among major Dow winners, Boeing surged 2.1% after raising its 20-year forecast for global aircraft deliveries. Caterpillar turned in a similar performance after backing its 2007 outlook. Alcoa was also up almost 3% after Alcan said that it might make a counteroffer for Dow component Alcoa.
Decent PPI and CPI reports expected to boost market
Of the 10 economic sectors trading closing higher today, Utilities led the charge followed by Materials.
Crude oil futures rose today after Energy Department came out with today’s weekly inventory report. The report showed a smaller than expected gain in U.S. supplies of crude for the week ended 8 June. Gasoline futures also rallied on the report after it failed to climb for first time in 6 weeks. Crude-oil futures for light sweet crude for July delivery today closed at $66.26/barrel (higher by $0.91/barrel or 1.34%) on the New York Mercantile Exchange.
Trading volumes showed 1.6 billion shares exchanging hands on the New York Stock Exchange and 2.1 billion trading on Nasdaq. Gaining issues topped decliners by 13 to 3 on the NYSE and by 20 to 9 on the Nasdaq.
Tomorrow PPI report will be closely watched and should help set the tone for the day's trading. Weekly Initial Claims will also be released before market opens. On the earnings front, Goldman Sachs and Bear Stearns are expected before the bell while Adobe Systems will report after the close.