Sun, Oct 03, 2004 - Page 10 News List

US stocks skyrocket on manufacturing growth

OPTIMISM Investors' faith in the US' economic recovery was renewed by the 16th straight month of growth in the manufacturing sector and raised construction spending


Newly optimistic investors sent stocks sharply higher on Friday, propelling the Dow Jones industrials 112 points higher, as new economic data showed strength in manufacturing and the departure of PeopleSoft Inc's chief executive raised hopes for a merger in the tech sector. The major indexes closed the week with respectable gains.

With the Institute for Supply Management's manufacturing index posting the 16th straight month of growth in that sector, investors' faith in the economic recovery was renewed. Strong increases in construction spending also improved the mood on Wall Street.

Oil prices could remain a problem, however, as futures trading closed above US$50 per barrel for the first time in New York due to uncertainty over the political situation in Nigeria, one of Africa's top oil producers. A barrel of light crude settled at US$50.12, up US$0.48, on the New York Mercantile Exchange. Crude futures prices rose 2.5 percent for the week.

"We've gotten through September, traditionally the worst month for stocks, in pretty good shape," said Joseph Keating, chief investment officer at AmSouth Asset Management.

"If oil prices can move down further, I think we'll be set up nicely for a rally in November, December and early January," he said.

The Dow Jones industrial average rose 112.38, or 1.1 percent, to 10,192.65.

Broader stock indicators were sharply higher. The tech-focused NASDAQ composite index gained 45.36, or 2.4 percent, to 1,942.20, its highest closing level since July 9. The Standard & Poor's 500 index was up 16.92, or 1.5 percent, at 1,131.50, posting its best finish since June 30.

For the week, the Dow gained 1.5 percent, the NASDAQ was up 3.3 percent and the S&P 500 rose 1.9 percent. Bargain hunting in the technology sector and portfolio shuffling at the end of the quarter helped stocks move higher despite rising oil prices and losses due to Dow component Merck & Co, which lost 27 percent of its value on Thursday after pulling its Vioxx arthritis drug from the market due to an increased risk of heart attack and stroke.

On Friday, signs of strength in manufacturing buoyed stocks, though whether the strength will translate into more jobs won't be known until the government's next jobs report, due on Friday.

The September ISM manufacturing index reading came in at 58.5, slightly better than the 58.3 analysts had expected, but lower than the 59.0 reading in August.

The Commerce Department reported construction spending rose 0.8 percent in August, far outstripping the 0.3 percent Wall Street expected.

July's construction spending increase was revised upward as well, to 1.1 percent from 0.4 percent, giving investors hope that both businesses and consumers continued to put money into real estate despite recent interest rate increases from the Federal Reserve.

A lower-than-expected University of Michigan consumer sentiment index did not appear to have a negative impact on the market. The index reading for last month was 94.2, down from the 95.8 posted in August and less than the 96 reading Wall Street had forecast.

PeopleSoft surged US$2.98 to US$22.83 after the business software maker fired chief executive Craig Conway, replacing him with chairman and founder David Duffield. The company is currently fending off a US$7.7 billion takeover bid by rival Oracle Corp, which gained US$0.62 to US$11.90 on the news.

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