Stocks extend gains despite bad news
Stocks extended their gains Thursday with a modest advance as investors weighed fresh economic data, including a sharp drop in new home sales, for clues to whether more interest rate cuts are in the offing.
The Commerce Department’s report that sales of new homes plunged 8.3 percent in August to the lowest level in seven years was the latest round of bad news for the housing sector, but its arrival didn’t spook investors. Instead, stocks built on the sizable gains logged Wednesday.
Concerns that housing market ills could drag the broader economy into a recession have periodically bubbled up in recent months. However, with the Fed’s larger-than-expected rate cut last week, investors appeared hopeful that the central bank’s move to make capital cheaper would provide adequate stimulus to stave off a broad slowdown.
And with the final trading day of the quarter arriving Friday, some investors were likely buying and selling to dress up their portfolios.
“You have positioning for the family photo,” said Erik Davidson, senior director of investments at Wells Fargo Private Bank. He noted that as investors go about the usual business of shoring up their positions for the end of the quarter some have been surprised that there hasn’t been more bad news about tightness in the credit markets or about investments soured by bad mortgages.
“It’s almost a return to normalcy. This is a bit of a relief rally, and the bad things that people are afraid of aren’t really happening,” he said of recent gains.
The Dow Jones industrial average rose 34.79, or 0.25 percent, to 13,912.94. The Dow now sits only about 87 points below its record close of 14,000.41 on July 19.
Broader indexes also advanced. The Standard & Poor’s 500 index rose 5.96, or 0.39 percent, to 1,531.38, and the technology-heavy Nasdaq composite index rose 10.56, or 0.39 percent, to 2,709.59.
Bond prices rose, pushing the yield on the benchmark 10-year Treasury down to 4.57 percent from 4.62 percent at Wednesday’s close. Bond prices and yields move in opposite directions.
The dollar was mixed against other major currencies, while gold prices edged higher.
Crude oil prices rose as a tropical depression near Mexico raised concerns about possible disruptions to oil and gas production. A barrel of light sweet crude jumped $2.58 to settle at $82.88 per barrel on the New York Mercantile Exchange.
Dave Hinnenkamp, chief executive KDV Wealth Management in Minneapolis, said that with the Dow not far off its highs, some investors are growing more confident in the market’s prospects.
“A lot of it has to do with people sitting on the sideline with some cash when the market was coming down,” he said. “And now that they’ve seen it bounce up, I think some of it has to do with people diving back into the market not wanting to miss the rally.”
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.18 billion shares compared with 1.29 billion shares traded Wednesday.
The Russell 2000 index of smaller companies rose 4.89, or 0.60 percent, to 814.01.
In European trading, Britain’s FTSE 100 closed up 0.83 percent, Germany’s DAX index rose 0.64 percent, and France’s CAC-40 rose 0.75 percent. In Asia, Japan’s Nikkei index and Hong Kong’s Hang Seng Index each closed up 2.4 percent.