- The Washington Times - Monday, December 29, 2003

NEW YORK — The Nasdaq Composite Index burst past 2,000 yesterday, and the Dow Jones industrials surged more than 125 points as investors shook off concerns about the effect of mad cow disease and looked optimistically toward 2004.

The market also got a lift from early indications that the holiday shopping season had gone well, including a report from Mastercard that consumer spending was up 6.5 percent. Portfolio managers may be looking for more positive news in January, which is typically a good month for the markets, said Brian Bush, director of equity research at Stephens Inc.

“Even with a heightened terror alert, the onset of mad cow for the first time in the U.S., throughout all of that, the market has continued to move higher,” Mr. Bush said. “If you’re a portfolio manager, you’ve had a great year, the first up year in three, and the outlook for ‘04 looks good … you’re probably looking to make some bets going into the new year.”

The Nasdaq closed up 33.34, or 1.7 percent, at 2,006.48, its highest point in nearly two years, after a 1.1 percent advance last week. The tech-dominated index climbed above 2,000 for all of a minute on Dec. 3 before falling back, and had not closed above 2,000 since Jan. 15, 2002, when it stood at 2,000.91.

The Dow rose 125.33, or 1.2 percent, to 10,450.00, after gaining 0.5 percent last week. It was the highest close for the index of 30 actively traded industrial stocks since March 21, 2002, when it ended the day at 10,479.84. The Dow closed above 10,000 for the first time in 18 months on Dec. 11.

The Standard & Poor’s 500 index closed up 13.59, or 1.2 percent, at 1,109.48, after rising 0.2 percent last week. It was the first time the S&P; closed above 1,100 in more than 20 months; it last closed higher on April 19, 2002, at 1,125.17.

The Nasdaq’s recovery has been perhaps the most important indicator of the stock market’s growing strength. Decimated in the three-year bear market, the Nasdaq has regained 80.1 percent since it hit a six-year low of 1,114.11 on Oct. 9, 2002.

While it still has more than 3,000 points to regain before it can reach its all-time closing high of 5,048.62, the Nasdaq is not expected to return to that level any time soon.

Trading was light as many investors took off the last week of the year. But mutual fund managers and other institutional investors were engaged in end-of-the-quarter window dressing, the practice of adding to portfolios to make them look more impressive in reports to shareholders.

With Wall Street carrying its solid recovery into the final days of 2003, many managers were eager to get as many winning stocks as possible into their portfolios. Investors’ spirits have been buoyed for several months by generally good economic news. Now the focus will be on how companies perform, said Tim Smalls, a trader with SG Cowen Securities.

“The driving force is corporate earnings. … That’s it in a nutshell,” Mr. Smalls said. “A good first quarter could take us to the next level in 2004.”

Some food company and restaurant stocks extended their recoveries from losses suffered last week after the first reported case of mad cow disease in the United States. Consumer reaction to the news appeared muted, as hamburger chains reported brisk weekend sales and J.P. Morgan upgraded its rating of McDonald’s Corp.

McDonald’s closed up 51 cents at $24.60, Outback Steakhouse Inc. rose $1.78 to $44.50, and Tyson Foods gained 47 cents to $13.06.

However, Hormel Foods Corp. lost 58 cents to $25.57 and Smithfield Foods closed down 85 cents at $21.06 after Credit Suisse First Boston downgraded the meat processors to neutral from outperform, citing price pressures and lost export markets. At least 29 countries have banned U.S. beef since the scare.

Also yesterday, the New York Stock Exchange announced it would take steps to delist Footstar Inc. in view of the uncertainty surrounding the company’s restatement of earnings through 2002 and continued delays in the completion of its financial statements.

Advancers outnumbered decliners more than 3-to-1 on the NYSE. Volume was at 1.05 billion shares, compared with 356.05 million shares on an abbreviated day of trading Friday.

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