Stocks jumped yesterday, as investors sought bargains in recently ignored sectors like financial services and industrial concerns.
Even the long high-flying technology stocks joined the rally in a late-day spurt that pulled the Nasdaq composite from negative territory to a 2.22-point gain to close at 4,420.77.
The Dow Jones industrial average rocketed 198.25 to 10,718.09, while the S&P 500 index gained 12.11 to 1,402.05.
“During this bull market, bears have often complained about poor market breadth,” said Bernie Schaeffer, chairman of Schaeffer’s Investment Research. “However, we have noted a steady improvement in breadth of late. The trendline has been rising in a pattern of higher highs and higher lows.”
Part of the reason is that investors are less nervous about the prospect of a series of interest rate increases from the Federal Reserve. While most economists still believe the Fed will impose a quarter-point hike at its next meeting in March, fewer support the idea that there will be a series of hikes after that one.
Another reason that stocks are rallying is the continued spate of strong earnings reports.
“With the earnings season 84 percent complete, this quarter ranks as one of the best surprises in the past 13 years,” said Joseph Abbott, senior equity strategist at I/B/E/S International Inc., which tracks corporate profits. “Most companies have reported earnings above the I/B/E/S consensus, well above the trend of the past several quarters at this time of the earnings season.”
Just yesterday, top companies — including Chris-Craft Industries, Applied Materials, BP Amoco, CBS, Network Appliances, DrKoop.com, and Lycos — reported profits that were higher than last year.
Applied Materials jumped $5.44 to $166.50, while Network Appliances rose $3.25 to $151.56.
About 1.1 billion shares changed hands on the Big Board, above the three-month daily average of 968 million.
Still, many top strategists continue to warn their clients not to expect the sky-high returns they’ve garnered in recent years.
“We are likely beyond the period of real fireworks for the market in general, however, and will spend much more time in a trading range environment for the next few months, which will be quite a bit different from what we have become accustomed to over the last several months,” said Bob Dickey, a strategist with Dain Rauscher. “It continues to be more of a stock-picker’s market, as the bullish and bearish individual stocks seem firmly stuck in their recent trends with few bottoms or tops in sight.”
Some of the most-active stocks yesterday were Microsoft, down $1.06 to $98.56; Intel, up $2.13 to $112, and Cisco Systems, down $2.50 to $128.
Bonds fell in advance of expected Congressional testimony from Fed Chairman Alan Greenspan tomorrow. The yield on the benchmark 30-year Treasury rose 1 basis point to 6.24 percent.
Bond traders said they were not happy with the Fed’s report on growing industrial production in the United States.
The report, released yesterday morning, showed that factories posted their biggest production gain in 18 months last month, rising a full 1 percent, after gaining only 0.4 percent in December.
That statistic fueled speculation that the economy is still growing too fast to stave off inflation, which reduces the value of long-term bonds.