- The Washington Times - Wednesday, December 22, 2004

NEW YORK (AP) — Wall Street extended its record-setting rally yesterday as a sharp drop in oil prices and a surprise jump in the nation’s gross domestic product encouraged more buying. The Dow Jones Industrial Average and the Standard & Poor’s 500 Index both reached new 3-year highs.

The market’s buying momentum surged when crude oil futures plummeted in response to the Energy Department’s report of an increase of 2.1 million barrels in the nation’s petroleum reserve last week. Demand for gasoline also fell. Shortly after the report, a barrel of light crude was quoted at $44.24, down $1.52, on the New York Mercantile Exchange.

Wall Street also welcomed the Commerce Department’s final third-quarter GDP reading, which rose to 4 percent from previous estimates of 3.9 percent.

“Right now, the market is moving on any headline that moves over the wires, and right now the news is pretty good,” said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. “That’s what happens in a slow week, like we’re having. We’ll probably drift higher this way until earnings season next month.”

The Dow rose 56.46, or 0.52 percent, to 10,815.89, surpassing the 3-year high reached Tuesday. The Dow last closed above 10,800 on June 13, 2001.

Broader stock indicators were moderately higher. The S&P; 500 was up 4.12, or 0.34 percent, at 1,209.57, bettering the 3-year high set Dec. 15. The Nasdaq Composite Index gained 6.12, or 0.28 percent, to 2,157.03, fewer than six points off its multiyear high set last week.

The GDP report gave many investors hope that the fourth-quarter reading will be stronger than expected. Analysts had feared that low job growthand high energy prices would stifle economic growth. Oil prices, in particular, were seen as an extra drain on consumers’ incomes, but the Commerce Department figure, along with the Energy Department’s inventory report, assuaged some of those concerns.

“Anytime you’re up the day after you set new highs, that’s a great sign,” said Neil Massa, equity trader at John Hancock Funds. “Long term, of course, whether we can sustain it remains to be seen. But I do think that, without any major surprises, we’ll be up the rest of the year.”

Investors also took note of the departure of Fannie Mae’s Chief Executive Officer Franklin Raines and Chief Financial Officer Timothy Howard, hoping that the mortgage giant can now move beyond its accounting scandals. The company is the biggest player in the country’s $8 trillion mortgage market.

Fannie Mae’s stock has suffered since Sept. 22, when the company said the Securities and Exchange Commission was investigating its finances. It fell to a 52-week low of $63.40 on Oct. 4, but recovered somewhat as the investigations continued. Yesterday, news of the resignations sent shares of Fannie Mae climbing $1.57 to $71.92.

Microsoft Corp. slipped 10 cents to $26.97 after Europe’s second-highest court upheld interim sanctions against the software giant in the European Commission’s antitrust case. The Dow component, which could be forced to alter its business practices and offer a version of Windows in Europe without its Media Player software, said it would seek to settle the case. But with the victory, regulators may decide to press forward.

The Boeing Co. said Japan Airlines has agreed to buy 30 of the aerospace company’s new 7E7 Dreamliners, with an option to buy 20 more. Terms were not disclosed, but analysts valued the deal at $4 billion. Boeing rose 49 cents to $53.91.

Research in Motion Ltd., maker of the popular BlackBerry e-mail pager, surpassed Wall Street earnings estimates by 3 cents per share, but its profit outlook for future quarters fell below analysts’ expectations. Research in Motion tumbled $3.55, or 4.08 percent, to $83.49.

Increasing shipments of microchips that power cell phones could help Qualcomm Inc. to higher revenue in the current quarter, the company said. Qualcomm said it expects its first-quarter revenue to come in higher than Wall Street expects. Qualcomm added 46 cents to $44.44 on the news.

Advancing issues outnumbered decliners by nearly 8 to 5 on the New York Stock Exchange, where volume came to 1.39 billion shares, compared with 1.48 billion Tuesday.

The Russell 2000 index of smaller companies was up 2.26, or 0.35 percent, at 648.46.

Overseas, Japan’s Nikkei stock average rose 0.78 percent. In Europe, Britain’s FTSE 100 closed up 0.94 percent, France’s CAC-40 climbed 0.96 percent for the session, and Germany’s DAX index gained 0.64 percent.

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