Stocks rose soundly Friday, capping a strong week for Wall Street, as investors drew confidence from strong results at Oracle Corp. and a continued sense that lower interest rates should help bolster the economy.
Oracle’s report that quarterly profits rose 25 percent as sales grew at their fastest pace in seven years offered fresh evidence that some sectors of the economy continue to hum along even as areas such as housing cause consternation for many investors.
Wall Street found renewed optimism this week after the Federal Reserve lowered interest rates a larger-than-expected one-half percentage point Tuesday. The central bank also lowered the rate it charges to lend directly to banks by the same amount.
“As much as we often underestimate the depth of our problems it’s also natural for us to underestimate the depth and robustness of our economy. There are many industry segments that are very healthy,” said Robert Brown, chief investment officer at Genworth Financial Asset Management, pointing to stronger-than-expected earnings reports. He contended while Wall Street’s exuberance over the Fed’s rate cuts is understandable, investors are blithely looking past some of the concerns the economy faces.
The Dow Jones industrial average rose 53.49, or 0.39 percent, to 13,820.19.
Broader stock indicators also rose. The Standard & Poor’s 500 index advanced 7.00, or 0.46 percent, to 1,525.75, while the Nasdaq composite index rose 16.93, or 0.64 percent, to 2,671.22.
For the week, the Dow was up 2.9 percent, while the S&P 500 index added 2.8 percent. It was the best weekly showing for the indexes since March. Nasdaq rose 2.7 percent, its best weekly gain since last month.
Friday’s session brought “triple-witching,” a once-a-quarter occurrence when investors face simultaneous expiration of contracts for stock index futures, index options and stock options. Such days often bring higher-than-normal volume as investors jockey for new positions, although analysts noted Friday’s volume wasn’t heavy considering the expirations.
Advancing issues outnumbered decliners about 2 to 1 on the New York Stock Exchange, where volume came to 2.08 billion shares, compared with 1.27 billion shares traded Thursday.
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.63 percent from Thursday’s close of 4.69 percent. Treasurys have sold off for three straight sessions amid concerns about the possibility of increasing inflation and the prospect of Saudi Arabia lightening its U.S. government holdings. The gains on Wall Street have also drained some money out of the bond market.
Brown contends the stock and bond markets have diverged; the equity market is regarding the Fed’s rate cut as providing adequate liquidity to propel stocks to new highs.
“These rates cuts are not turning bad debt into good debt. And this rate cut is not changing the housing debacle’s impact on slowing economic growth. There is no question that the effect is potent, that we will incur significantly slower economic growth and the probability of a recession is now great. Their actions are honestly not having any impact on that probability,” he said of the Fed.
Gold prices rose, while the dollar bounced back after hitting another record low against the euro, which surpassed $1.41 for the first time. The dollar slumped against other major currencies.
With no major economic reports, Wall Street looked to corporate news.
Oracle rose 93 cents, or 4.4 percent, to $21.98 following its earnings report.
The Russell 2000 index of smaller companies rose 3.35, or 0.41 percent, to 813.11.
In trading abroad, Britain’s FTSE 100 finished up 0.43 percent, Germany’s DAX index rose 0.77 percent, and France’s CAC-40 rose 0.21 percent. In Asia, Japan’s Nikkei index closed down 0.62 percent and Hong Kong’s Hang Seng Index rose 0.56 percent.