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Sat, Aug 02, 2003 - Page 12 News List

US hopes bolstered by reports

SOLID INDICATORS A battery of economic data is being interpreted by many economists as clear signs of an economic rebound, while the dollar starts to gain

REUTERS , NEW YORK

Positive news that the economy is picking up steam sent US stocks higher on Thursday, while bond prices fell as investors took solid government economic reports as clear signals of a rebound.

The benchmark 10-year note shed 24/32 to yield 4.41 percent -- near its highest level in a year -- up from 4.31 percent late Wednesday and a 45-year low of 3.07 percent last month.

The dollar jumped to its highest levels in at least a week against all major European currencies, while oil and gold prices dropped.

The Dow Jones Industrial Average, which climbed more than 100 points earlier in the session on the rosy economic news, scaled back to end up 33.75 points, or 0.37 percent, to 9,233.80. The broader S&P 500 climbed 2.82 points, or 0.29 percent, to 990.31 and the tech-heavy NASDAQ Composite rose 14.11 points, or 0.82 percent, to 1,735.02, based on the latest available figures.

Volume was 1.6 billion shares on the New York Stock Exchange and 1.8 billion on NASDAQ.

Data from three key reports on US economic growth, Midwest business activity and jobless claims was stronger than expected, giving investors hope the faltering economy is on the right track to recovery.

The government said the US GDP in the second quarter grew at an annualized pace of 2.4 percent, above the 1.5 percent forecast and driven by the biggest rise in defense spending since the Korean War.

US Midwest manufacturing activity improved more than expected last month. The National Association of Purchasing Management-Chicago index rose to 55.9, its highest level since January, from 52.5 in June. Economists expected a reading of 54.0. Any reading above 50 indicates expansion.

And US initial jobless claims for the week ended July 26 showed a surprising drop of 3,000 to 388,000, a good omen for Friday's July report. Economists had forecast 400,000 claims.

"Here you have the first set of numbers that indicate that the economy is doing a notch better," said John O'Donoghue. "It just feels like the underlying tone to the stock market is one of economic stability and one of economic growth."

Upbeat earnings from blue-chip Dow components Procter & Gamble Co and Exxon Mobil Corp, which both posted higher quarterly profits, also boosted stocks.

Tech issues rose after brokerage Merrill Lynch said it was "shifting stance on the semiconductor business from our neutral position to a more positive outlook."

For last month, the Dow shot up 2.8 percent, the S&P 500 rose 1.6 percent, and the NASDAQ Composite climbed 6.9 percent.

The NASDAQ Composite Index rounded out last month with its first six-month string of gains since 1995. The Dow Jones Industrial Average and the Standard & Poor's 500 index racked up a fifth straight month of gains -- a streak unseen since 1998.

US Treasury prices fell as evidence of quickening US economic growth raised the specter of tighter monetary policy by early next year and pushed yields to one-year highs.

The 30-year bond lost 1 and 18/32 to 100 and 7/32, pushing its yield up to 5.36 percent from 5.25 percent on Wednesday.

The two-year note's yield jumped to 1.75 percent from 1.64 percent.

However, the dollar shot up against its major rivals, fueled by the positive economic data, which sent the euro to a session low of US$1.1226.

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