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Archive for Tuesday, August 20, 2002

Investor optimism drives Dow close to 9,000 mark

August 20, 2002

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— Investors held on to their optimism Monday, sending stocks sharply higher in response to stronger retail earnings and a smaller-than-expected drop in a key economic gauge. The Dow Jones industrials surged more than 210 points to close just below 9,000.

Analysts said the absence of any significant negative news, such as accounting restatements, added to the good mood on Wall Street, which has seen two straight weeks of gains among the three major indexes. Light trading also gave prices a boost.

"The path of least resistance is always higher," said Richard E. Cripps, chief market strategist for Legg Mason of Baltimore.

The Dow closed up 212.73, or 2.4 percent, at 8,990.79, following a 0.4 percent advance last week. The Dow has now recovered about 1,500 points since it hit an intraday low of 7,489.53 on July 24. The last time the Dow closed above 9,000 was nearly six weeks ago, on July 9.

The broader market also closed higher Monday. The Nasdaq composite index was up 33.53, or 2.5 percent, at 1,394.54, having surged 4.2 percent last week. This was the Nasdaq's best finish in a month, having closed on July 17 at 1,397.25.

The Standard & Poor's 500 index rose 21.93, or 2.4 percent, at 950.70, following a weekly gain of 2.2 percent.

The Conference Board reported that its Index of Leading Economic Indicators fell 0.4 percent to 111.7 in July, slightly beating analysts' expectation of a decline of 0.5 percent.

The better than expected report prompted investors to continue their buying from last week. The three major indexes rose for the second straight week last week, a feat not seen in five months, buoyed by greater Wall Street confidence after hundreds of companies vouched for their financial statements by the Aug. 14 deadline set by the Securities and Exchange Commission.

Strong earnings lifted several issues, including home improvement retailer Lowe's, which rose $4.21 to $41 after reporting a 42 percent increase in second-quarter earnings and raising forecasts for the third quarter that beat analysts' current consensus.

Toy retailer Toys "R" Us gained $1.08 to $13.90 after narrowing its loss to $17 million in the second quarter.

Vivendi rose $2.17 to $11.93, boosted by company chairman Jean-Rene Fourtou's letter to shareholders announcing $1.97 billion in financing from creditor banks.

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