U.S. Stocks Rise After Record Rally
NEW YORK (MarketWatch) -- U.S. stocks rose further Friday, and were on track to post strong weekly gains, as investors continued the previous session's record rally after earnings from General Electric Co., a big drop in monthly retail sales, and a jump in a consumer-confidence survey.
"After a day like yesterday, the market is like a sprinter, it needs to pause," said Kevin Kruszenski, head of sales trading at KeyBanc Capital. "It wouldn't surprise me to see us pull back, but it'll be interesting to see how we close."
On Thursday, the Dow Jones Industrial Average surged over 280 points to new record highs, posting its best one-day performance in nearly four years. The blue-chip average continued to advance in record territory on Friday.
In recent action, the Dow industrials gained 48 points to 13,910, after earlier touching another record high of 13,924. The Dow's gains for the week so far stood at 2.2%, the best weekly performance since April 20.
Fifteen of the 30 blue-chip components advanced, including Caterpillar Inc. , AT&T Inc. , Verizon Communications and Exxon Mobil Corp. .
Leading the Dow's gains, Alcoa Inc. rose 4.4% after announcing late Thursday it will withdraw its bid for Alcan Inc. in light of Rio Tinto's higher acquisition offer. Alcoa could also become the center of a bidding war.
Also a standout among the blue chips, shares of General Electric Co. rose 1.8%. The conglomerate reported in-line earnings and also announced that it is exiting its U.S. subprime mortgage business.
The S&P 500 rose 5.5 points to 1,553, while the Nasdaq Composite reversed early weakness to gain 2.4 points to 2,704.
Stocks received a slight mid-morning pop after news that consumer sentiment, as measured by a Reuters and the University of Michigan survey, rebounded in early July, as rising stock prices and falling gasoline prices brightened the outlook.
Meanwhile, technology stocks fell ahead of key earnings reports due out next week
EMC Corp. fell after two analysts downgraded the maker of data-storage products. And chip-equipment maker Semitool Inc. cut its revenue outlook to a range of $45 million to $46 million, down from $50 million to $53 million previously.
Trading volumes showed 915 million shares changing hands on the New York Stock Exchange and 1.2 billion trading on the Nasdaq stock market. Declining issues topped gainers by 3 to 2 on the NYSE and by 17 to 10 on the Nasdaq.
By sector, consumer stocks as well as banks were weak, while oil and multimedia networking led the gainers.
Retail sales slump
"Can we continue the momentum that started yesterday? It's going to take some significant good news," said Jefferies & Co. chief market strategist Art Hogan.
On Thursday, the proximate cause for the rally in stocks was above-forecast monthly sales numbers from Wal-Mart Stores , Costco Wholesale and other retailers, as well as a new $38.1 billion deal under which Rio Tinto agreed to buy Alcan.
But before Friday's bell, investors digested news that retail sales fell 0.9% last month, the largest decline in nearly two years, due to weak demand for durable goods and falling gas prices. The decline was much larger than the 0.3% drop estimated by economists surveyed by MarketWatch. Revisions to May and April data were also negative on average.
So investors were left Friday wondering how to gauge whether Thursday's somewhat puzzling rally has room to build or has run its course.
"It's very difficult to hold onto gains in the summer. We'll probably retrace yesterday's news," said Jefferies' Hogan.
Possible catalysts include good earning news from Corporate America, getting oil below $73 a barrel, or getting the 10-year Treasury note's yield "out of scary territory," he said.
Stocks on the move
Bank of America got some good news from a Dutch court, which ruled that BN Amro can go ahead with the sale of its Chicago-based LaSalle division to the banking giant. The sale had been put on hold after ABN shareholders objected.
ABN Amro was up 1.6%
In energy, Chesapeake Energy Corp. and Anadarko Petroleum Corp. entered multiple agreements, including a joint drilling venture in West Texas.
Nordstrom Inc. is near a deal to sell its Faconnable apparel and retail line to M1 Group for slightly more than $200 million, according to a media report late Thursday. The terms of the transaction aren't final and the deal could still fall apart.
Other markets
Crude-oil futures rose sharply early Friday, getting a boost after the International Energy Agency said oil demand will increase next year. The August futures contract was up $1.23 at $73.72 a barrel.
Treasurys rallied after the much weaker-than-expected retail sales figures. Signs that the consumer, long the stalwart of the economy, could be slowing down is helpful to the bond market, which tends to benefit from any sign of economic weakness.
The benchmark 10-year Treasury note last was up 8/32 at 95 14/32 with a yield of 5.094%.
The dollar fell to a fresh record low against the euro early Friday, hitting an intra-session low of $1.3811, after the retail sales numbers. Economic weakness hurts the dollar by building a case for the Federal Reserve to lower rates at a time when other nations are lifting rates.
The euro was last up 0.2% at $1.3806, while the dollar was down 0.2% at 122.20 yen. The British pound was up 0.4% at $2.0362.
The dollar's weakness lent modest support to the benchmark gold contract. Gold for August delivery rose 70 cents at $669.10 an ounce on the New York Mercantile Exchange.
By Nick Godt