Markets & Finance

Dow Tops 12,500 after Upbeat Housing Data


The blue-chip benchmark reached another all-time closing high. November new home sales bounced 3.4%, while crude futures fell below $61

Wall Street may be quiet this week, but bulls are out in force. Stocks finished broadly higher in light post-Christmas trading Wednesday, with the Dow hitting a new all-time closing high, as traders adjust their portfolios for the end of the year. A report on November new home sales posted surprisingly strong gains, while weekly mortgage applications declined.

On Wednesday, the Dow Jones Industrial average rose 102.94 points, or 0.83%, to 12,510.57, above its previous closing record of 12,471.32. General Motors (GM) helped provide support amid industry consolidation talk. The broader Standard & Poor's 500 index added 9.94 points, or 0.7%, to 1,426.84. The tech-heavy Nasdaq composite was up 17.71 points, or 0.73%, to 2,431.22.

NYSE breadth was positive, with 26 issues advancing for every 7 declining. Nasdaq breadth was 21-9 positive.

Investor optimism, more than fundamental factors, helped drive the market higher, some analysts say. "What you're seeing is the effect of the light-volume trading between the two holidays and the seasonality effect that normally happens this time of year with stocks," says Chris Johnson, CEO and chief investment strategist of Johnson Research Group.

A full docket of economic reports could determine whether stocks' yearend rally persists. The calendar Thursday holds data on existing home sales, Chicago-area manufacturing, consumer confidence, and weekly jobless claims.

Thursday's release of November existing home sales is expected to slow 1% to a pace of 6.180 million units, according to Action Economics. December consumer confidence is seen falling to 102.0 from 102.9 in November.

Meanwhile, the Chicago purchasing manager's index is forecast to bounce to 53.0 from November's 49.9, Action Economics says. Jobless claims are seen flat at 315,000 for the week ended Dec. 23.

In economic news Wednesday, new home sales rebounded 3.4% to a 1.047 million rate in November, stronger than expected, from an upwardly revised 1.013 million in October. Shares of homebuilders advanced on the news.

The surprisingly upbeat report suggests the housing markets' woes may be ending, some analysts say. "Although no doubt this report was boosted by the mild weather in parts of the country, the pickup in sales and decline in the number of homes for sale provide further tentative evidence that the housing market is stabilizing," says John Ryding, chief U.S. economist at Bear Stearns, in a note to clients. "The major caveat with this conclusion is the failure of this report to track cancellations."

Other housing data disappointed. The Mortgage Bankers Association's mortgage applications index fell 14.2% in the week ended Dec. 22.

Among Wednesday's stocks in the news, Ford (F) was higher following reports CEO Alan Mulally met with Toyota (TM) Chairman Fujio Cho, raising hopes of a possible alliance between the two automakers.

In tech, Apple (AAPL) was little changed after sliding early on a report federal prosecutors are examining administrative documents that were allegedly falsified by company officals to maximize profits of stock option awards to executives.

In deal news, McClatchy (MNI) said it was selling the Star Tribune to private equity firm Avista Capital Partners for $530 million.

Elsewhere, UnitedHealth (UNH) was slightly higher after dipping at the outset on news the SEC has launched a formal investigation surrounding the company's stock options practices.

Eli Lilly (LLY) was modestly higher after a U.S. appeals court upheld the drugmaker's patent on its Zyprexa schizophrenia drug.

On the analyst front, IBM (IBM) was higher after ThinkEquity reportedly upgraded the computer maker from sell to buy and raised its target price to $110.

In the energy markets, February West Texas Intermediate crude oil futures fell 76 cents to $60.34 a barrel, as unusually mild weather reduced demand. Traders were awaiting a weekly inventory report due Thursday.

European markets finished solidly higher. The FTSE-100 index in London rose 55.2 points, or 0.89%, to 6,245.2. Germany's DAX index climbed 105.73 points, or 1.63%, to 6,608.86. In Paris, the CAC 40 index was up 86.07 points, or 1.58%, to 5,540.01.

Asian markets ended mixed. In Japan, the Nikkei 225 index gained 53.96 points, or 0.31%, to 17,223.15. In Hong Kong, the Hang Seng index advanced 286.45 points, or 1.48%, to 19,606.97. Korea's Kospi index lost 8.82 points, or 0.62%, to 1,425.1.

Treasury Market

Treasury yields pushed higher after the stronger-than-expected new home sales data. The 10-year note fell in price to 99-25/32 for a yield of 4.66%, while the 30-year bond dropped to 95-20/32 for a yield of 4.78%.

Hogan is a reporter for BusinessWeek.com in New York.

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