Broker views give US indices a boost
US STOCKS rose to fresh 13-month highs yesterday as upbeat broker views on improving prospects for two Dow components offset disappointing holiday spending outlooks from Target and Home Depot.
Even so, the underlying tone was negative as investors fretted about the strength of the recovery and the recent rally, and more stocks fell than rose.
Weak outlooks for the key holiday season weighed on investor psychology since consumer spending accounts for about two-thirds of US economic activity and is a key factor in corporate profits.
The Dow Jones industrial average rose 30.46 points, or 0.29 per cent, to close at 10,437.42. The Standard & Poor’s 500 Index edged up 1.02 points, or 0.09 per cent, to 1,110.32. The Nasdaq Composite Index added 5.93 points, or 0.27 per cent, to 2,203.78.
The three major US stock indexes initially started lower and then spent the bulk of the session near breakeven until the last half-hour of trading, when gains in the technology and energy sectors helped spur some upward momentum.
In Nasdaq trading, shares of software maker Microsoft gained 2 per cent to $30 – an 18-month closing high – after Morgan Stanley raised its price target on the stock and said it was upbeat on the prospects for Windows 7 and the company’s holiday season.
Shares of Exxon Mobil rose 0.8 per cent to $75.03 after Barclays raised its recommendation on the stock to “overweight” from “equal-weight”. Both Microsoft and Exxon are components of the 30-stock Dow Jones industrial average.
But shares of Home Depot fell 2.4 per cent to $26.99 after the leading US home improvement chain gave a forecast that suggested weaker results at the end of the year and predicted no meaningful recovery until the second half of 2010.
Target forecast a quarterly profit that could fall short of Wall Street’s estimates, saying early November results showed tepid consumer demand.
The stock dropped 3 per cent to $48.77, while the S&P consumer discretionaries index shed 0.7 per cent. The S&P retail index dropped 1.4 per cent.
Data showing that US industrial output rose less than expected in October was another headwind, overshadowing news that the Producer Price Index, a gauge of wholesale inflation, was tame last month.
With Tuesday’s slim gain, the S&P 500 is up 64.1 per cent from its 12-year closing low of 9 March.