Sun, Oct 16, 2005 - Page 10 News List

US stocks pick up momentum

BOUNCE OVERDUE Markets looked favorably upon a consumer price report, while retail spending increased marginally, though analysts were not sure why this was


US stocks rallied on Friday after a consumer price report that helped ease inflation fears, with solid quarterly results from General Electric and a fresh fall in crude prices lending further support.

The Dow Jones Industrial Average gained 70.72 points (0.69 percent) to 10,287.34 and the tech-heavy NASDAQ composite advanced 17.61 points (0.86 percent) to 2,064.83.

The broad-market Standard and Poor's 500 index climbed 9.73 points (0.83 percent) to 1,186.57.

The market sputtered in early trade but gathered momentum later in the session after digesting several economic reports offering contrasting pictures of the economy, and an earnings report from conglomerate General Electric seen as upbeat.

"The market is technically overdue for a bounce. It's been a steep and sharp 5 percent decline," said Jim Paulsen, chief investment officer at Wells Capital Management, referring to the pullback in stocks over the last 10 days.

Paulsen said the retreat in crude prices was further underpinning positive sentiment, raising hopes the market could once again see oil trading in the US$50 a barrel range.

"If that happens, it will also start to weaken `the consumer is going to die' story," said Paulsen, who also highlighted the latest retail sales figures, showing a solid rise in sales excluding auto sales last month.

The market looked on the positive side of the economic data. The headline inflation figure surged 1.2 percent -- the fastest pace in more than 25 years -- but the "core" inflation reading in the consumer price index (CPI), excluding food and energy prices, climbed just 0.1 percent, below economists' expectations.

"Excluding food and energy, the figures are pretty tame, which means the recent inflationary worries are probably not as big a concern as they were," said John Hughes, managing director at Epiphany Equity Research.

Meanwhile, US retail sales rose 0.2 percent last month as high gasoline prices offset slumping auto sales, the Commerce Department estimated.

"Consumers are still spending money, though it is not clear why," said Joel Naroff, from Naroff Economics.

"They are bummed out, worried about having to wear sweaters in their houses, being told to drive less ... the consumer confidence numbers may reflect feelings but they don't necessarily reflect spending decisions."

Among active US shares, General Electric rose US$0.21 to US$34.23 after the company, often seen as a harbinger of the overall economy, reported a 15 percent jump in quarterly profit and strong growth at all six business units.

Ford Motor Co slid US$0.38 to US$8.61, pressured by a Citigroup downgrade amid concerns about the entire auto industry's problems with pensions and suppliers after the Delphi bankruptcy.

Texas Instruments fell US$0.96 cents to US$29.93 after Bear Stearns cut its rating on the chipmaker due to increased competition, pricing pressure and a slower expected growth rate.

Continental Airlines meanwhile rose US$0.61 cents to US$11.78 as Lehman Brothers upgraded the carrier, saying industry fundamentals are improving.

The bond market fell. The 10-year US Treasury bond yield rose to 4.491 percent from 4.475 percent on Thursday and that on the 30-year bond to 4.712 percent against 4.705 percent. Bond yields and prices move in opposite directions.

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