Stocks rally in first session of 2003
Published: Friday, January 3, 2003 at 6:01 a.m.
Last Modified: Thursday, January 2, 2003 at 11:45 p.m.
NEW YORK - Wall Street had a strong start to 2003 Thursday with stocks posting their best gains in more than two months. The Dow Jones industrials soared more than 260 points following an unexpected surge in the manufacturing sector.
''We got a positive manufacturing report and that really was a turn-on,'' said Larry Wachtel, market analyst at Prudential Securities.
The rally also was owed to investors' relief at the end of three years of declines and to the start of a new tax year, a time when investors are busy buying stocks.
The Dow closed up 265.89, or 3.2 percent, at 8,607.52, claiming its biggest one-day gain since Oct. 15, when it rose 378.28. The rally came on the heels of the Dow having lost 16.8 percent in 2002 and 27.5 percent from 2000-2002.
The broader market was also sharply higher. The Nasdaq composite index rose 49.34, or 3.7 percent, to 1,384.85 after falling 31.5 percent last year and 66.9 percent over the past three years. The last time the Nasdaq had a bigger one-session gain was Oct. 15, when it climbed 61.91.
The Standard & Poor's 500 index advanced 29.21, or 3.3 percent, to 909.03, following last year's loss of 23.4 percent and a three-year drop of 40.1 percent. The last time the S&P had a stronger finish was Oct. 15, when it rose 39.83.
The market was cheered by news that U.S. manufacturing activity grew in December for the first time in four months. The Institute for Supply Management said its index of business activity rose to 54.7 in December from the 49.2 in November. A reading above 50 indicates the manufacturing sector is growing, while a reading below 50 signals contraction in the sector.
Analysts had forecast a reading of 50.1 for the month. The last time the index was above 50 was in August.
''Housing had been strong and consumers were hanging in there. The manufacturing side had been a laggard . . . and then along comes a number that knocked our socks off,'' Wachtel said.
Analysts were most encouraged by the new orders component of the report, hoping that indicated that companies are more confident about business prospects and the economy. New orders rose to 63.3 from 49.9 in November.
Thursday's advance was embraced by investors disappointed that Wall Street had forfeited the so-called Santa Claus rally. Recent worries about rising oil prices thwarted the usual year-end advance.
But analysts were wary of reading too much into one day of trading, which was light due to the winter holidays, and one economic report, the first of 2003.
''It is only one data point. It is the first day of the new year. It is not going to tell us where we are going forward. It is one piece of the puzzle but certainly not the whole picture,'' said Mark Donahoe, managing director at US Bancorp Piper Jaffray in Minneapolis.
Manufacturers were among Thursday's winners on Wall Street. 3M rose $3.45 to $126.75 and Caterpillar climbed $2.03 to $47.75.
Merck rose $1.64 to $58.25 after the Food and Drug Administration approved the drug maker's allergy drug Singulair for relief of hay fever.
J.P. Morgan Chase advanced $1.78 to $25.44 after announcing it had reached a settlement with 10 insurance companies. The insurers will pay about 60 percent of the $1 billion J.P. Morgan said it was owed to cover losses on deals related to the now collapsed Enron Corp.
Cardinal Health advanced $2.66 to $61.85 on a ratings upgrade from Jefferies and American Eagle Outfitters rose $1.39 to $15.17 on an upgrade from Goldman Sachs.
Advancing issues outnumbered decliners more than 3 to 1 on the New York Stock Exchange. Volume was light - 1.21 billion shares compared with 1.07 billion on Tuesday - as it has been for the past two weeks due to many traders being absent during the winter holidays. The market was closed Wednesday for New Year's.
The Russell 2000 index, which tracks smaller company stocks, rose 9.49, or 2.5 percent, to 392.58.
In Europe, France's CAC-40 advanced 4.3 percent, Britain's FTSE 100 gained 1.8 percent and Germany's DAX index soared 7.3 percent.
Japanese markets were closed Thursday for an extended New Year's holiday.
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