Stocks head higher for fourth day
NEW YORK, USA – INVESTORS yesterday bought companies that fare best when the economic outlook is bright.
All major stocks indexes rose, but gains were led by the riskier parts of the market. The Russell 2000, an index of small-company stocks, climbed for a fourth straight day. The Dow Jones transportation average, seen as a leading indicator for the broader economy, also jumped.
The Dow Jones industrial average rose 75.65 points, or 0.5 per cent, to 15,300.34 The S&P 500 index gained 11.86 points, or 0.7 per cent, to 1,652.32. The Nasdaq composite rose 19.43 points, or 0.6 per cent, to 3,504.26.
The gains suggest that investors are getting more confident about the outlook for the US economy. In the first half of the year, stock markets were powered by the safer companies that paid large dividends.
“When you see that leadership from the smaller caps that’s probably a good sign overall for the bigger blue chips to potentially follow suit,” said Ryan Detrick, a senior technical strategist at Schaeffer’s Investment Research. “People are leaving the more defensive areas.”
The Russell 2000 rose eight points, or 0.9 per cent, to 1,018.05. It has gained 4.2 per cent in July and is moving deeper into record territory. The index has risen more this year than its large-company counterparts, the Dow Jones industrial average and the Standard & Poor’s 500 index.
The Dow Jones transportation index rose the most among major US indexes yesterday, led by strong gains for Alaska Air Group and FedEx.
The index jumped 148 points, or 2.4 per cent, to 6,446. Alaska Air Group rose seven per cent after it forecast an additional US$50 million a year in revenue from increased fees. FedEx rose six per cent on speculation that William Ackman’s hedge fund, Pershing Square, could invest in the company.
Wall Street is also turning its attention to corporate earnings. The second-quarter results should give traders and investors fresh fodder after they spent most of June trying to figure out where the Federal Reserve was headed with its economic stimulus programme.
Along with the quarterly results, investors want to see how confident companies are about the rest of the year, said Cam Albright, director of asset allocation for Wilmington Trust Investment Advisors.
Major US stock indexes have notched a series of all-time highs this year on expectations that earnings will remain at record levels.
“A lot of what the market has justified its advances on is a strong second-half for the economy and a strong second-half for earnings,” said Albright. “It’s important that we see verification of that.”
Alcoa was the first major company to announce second-quarter results. The aluminium maker late Monday reported a second-quarter loss that wasn’t as big as financial analysts feared. The company benefited from strong demand for aluminium used in autos and aeroplanes, although that was offset by weaker prices.