Markets & Finance

Dow Hits New Record as Bernanke Speaks


Amid a flood of economic reports, the Fed chief finished his second day of Congressional testimony. Plus, Caterpillar's $7.5 billion buyback

Major stock indexes advanced modestly Thursday, with the Dow Jones industrial average reaching a new all-time closing high for a second straight session, as investors digested day two of Federal Reserve Chairman Ben Bernanke's congressional testimony along with a host of economic reports. Stock buyback news and deal talk in the automotive sector helped boost the blue chips.

On Thursday, the Dow rose 23.15 points, or 0.18%, to a record 12,765.01, after touching a new trading high of 12,779.03. The broader Standard & Poor's 500 index added 1.51 points, or 0.1%, to 1,456.81. The tech-heavy Nasdaq composite was up 8.72 points, or 0.35%, to 2,497.1.

NYSE breadth was positive, with 20 issues advancing for every 14 declining. Nasdaq breadth was flat.

In economic news, Bernanke spoke before the House Finance Commmittee for the second round of his semiannual monetary policy testimony. The Fed chief's prepared remarks were identical to Wednesday's, but the question-and-answer session found lawmakers probing Bernanke on such topics as Social Security and income inequality (see BusinessWeek.com, 2/14/07, "For Bernanke, Capitol Hill's No Easy Street").

Meanwhile, U.S. industrial production declined 0.5% in January, following an upwardly revised 0.5% rise in December. Capacity utilization fell to 81.2% from 81.8%.

This weakness in industrial production may not last, some analysts say. "The January industrial production data paint a weak picture of the activity in the factory sector at the start of 2007," says John Ryding, chief U.S. economist at Bear Stearns, in a note to clients. "However, this weakness in output is likely related to an adjustment in inventories and, given very low inventory-to-sales ratios, we see the sector as being in a solid position to rebound later in the first quarter."

U.S. import prices dipped 1.2% in January after climbing 1.1% a month earlier. Export prices rose 0.3%.

U.S. initial jobless claims jumped 44,000 to 357,000 in the week ended Feb. 10, reportedly due in part to bad weather, following an upwardly revised 313,000 initial claims the prior week.

The New York Empire State index of regional manufacturing activity bounced to 24.35 in February, better than expected, following January's unexpected drop to 9.1. Separately, the Philadelphia Fed index fell to 0.6 in February, weaker than expected, after rising to 8.3 in January.

Investors were awaiting another flood of economic reports set for Friday. Data releases on the way include January housing starts, wholesale inflation, and consumer sentiment.

Among Thursday's stocks in the news, Caterpillar (CAT) led the Dow higher after the heavy equipment maker announced a $7.5 billion stock buyback program.

Qualcomm (QCOM) boosted the Nasdaq, gaining 4% after Oppenheimer upgraded the stock from neutral to buy.

DaimlerChysler (DCX) was higher on speculation that the automaker may sell its Chrysler unit.

On the earnings front, NutriSystem (NTRI) was sharply higher after the weight management products maker issued first-quarter earnings guidance that topped Wall Street expectations.

Guess (GES) was solidly higher after the clothing retailer reported a 77% surge in fourth-quarter profit that topped analyst forecasts.

Evergreen Solar (ESLR) was sharply lower after the solar power product maker said its fourth-quarter loss widened, missing analyst estimates.

In M&A talk, Anheuser-Busch (BUD) was higher following a report indicating the brewer is in merger discussions with Belgium-based brewing giant InBev.

Elsewhere, Time Warner (TWX) was higher despite an SEC filing revealing billionaire investor activist Carl Icahn cut his holdings in the media conglomerate by 65% and tripled his holdings in Federated Department Stores (FD).

Hershey (HSY) said it is cutting about 1,500 jobs as the chocolate maker overhauls its manufacturing.

Nokia (NOK) said it will lay off 700 workers as it looks too boost efficiency.

In the energy markets, April West Texas Intermediate crude oil futures fell 1 cent to $57.99 a barrel, recovering from early lows after Wednesday's slide. "There was little news around to move the markets," says S&P.

European markets finished narrowly mixed. The FTSE-100 index in London rose 12.1 points, or 0.19%, to 6,433.3. Germany's DAX index edged down 2.56 points, or 0.04%, to 6,958.62. In Paris, the CAC 40 index slipped 4.96 points, or 0.09%, to 5,720.88.

Asian markets ended higher. In Japan, the Nikkei 225 index gained 144.59 points, or 0.81%, to 17,897.23. In Hong Kong, the Hang Seng index rallied 328.51 points, or 1.63%, to 20,538.42. Korea's Kospi index advanced 7.53 points, or 0.52%, to 1,443.63.

Treasury Market

Treasury yields dipped following the mix of data on industrial production, import prices, jobless claims, and the Empire State index. The 10-year note rose in price to 99-13/32 for a yield of 4.7%. The 30-year bond climbed to 99-06/32 for a yield of 4.8%. Technical buying may have fueled the rally in bonds, says Action Economics.

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

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