- The Washington Times - Monday, January 26, 2004

NEW YORK (AP) — Encouraging words from Federal Reserve Chairman Alan Greenspan sent stocks soaring yesterday as investors looked forward with renewed enthusiasm to upcoming earnings reports. The Dow Jones industrials reached a 31-month high, rising more than 130 points.

The markets got a late-day boost from Mr. Greenspan, who said at an economic conference in London that he was confident that jobs lost during the recent U.S. recession could be replaced. He also warned U.S. policy-makers against protectionist trade barriers, saying it could be bad for the global economy.

“I think Mr. Greenspan has given us some hope,” said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. “He’s confident there will be creation of new jobs and that was what the market wanted to hear.”

The Dow gained 134.22, or 1.3 percent, to close at 10,702.51, after a weekly loss of 0.3 percent that ended eight weeks of advances. It was the index’s highest finish since June 21, 2001, when it closed at 10,715.43.

The Dow is slightly more than 1,000 points short of the all-time high close of 11,722.98, reached Jan. 14, 2000.

The broader gauges also closed higher. The Nasdaq Composite Index, negative for much of the day, closed up 29.96, or 1.4 percent, at 2,153.83, after the 0.8 percent decline last week ended a six-week winning streak. The tech-heavy Nasdaq last closed higher on June 29, 2001, at 2,160.54.

The Standard & Poor’s 500 index closed up 13.82, or 1.2 percent, at 1,155.37, after a weekly rise of 0.1 percent — its ninth consecutive week of advances. It was the S&P; 500’s highest close since March 19, 2002, when it finished at 1,170.29.

About one-third of companies in the Standard & Poor’s 500 have reported results, and earnings are up about 27 percent overall — better than the 21 percent increase Wall Street had expected. That and upbeat economic news bode well for the economy, but some analysts are starting to worry that the market is overbought and may be headed for a pause.

Although technology and small-cap stocks continue to keep pace, there seems to be a shift toward higher-quality companies, said Joseph Keating, chief investment officer at AmSouth Asset Management.

“Our impression is that the Dow will do a little bit better in 2004 than some of the other indexes,” Mr. Keating said. “The valuations are looking better, and we think people are really going to come around to appreciate that dividends are tax-advantaged. That’s something that got lost in the shuffle last year.”

Mr. Greenspan’s comments, which did not address the outlook for the national economy, came a day before the Fed was to start a two-day meeting to consider when to raise interest rates. Low inflation and slow growth of jobs make it unlikely that rates will rise anytime soon, economists say.

Also yesterday, the National Association of Realtors reported that sales of previously owned homes reached a record high in the past year, largely fueled by attractive mortgage rates.

On the Dow, Merck & Co. closed up $1.42 at $47.20 after the financial journal Barron’s noted that the company trades at a lower price-to-earnings multiple than its rivals and offers a bigger dividend yield than many.

Dow component Hewlett Packard Co. rose 82 cents to close at $26.12 after rival printer maker Lexmark International Inc. beat expectations with a rise in quarterly profits on strong sales. Lexmark gained $5.66 to close at $84.50.

Aventis SA gained $2.10 to close at $75.10 after the French drug maker called on shareholders to reject a hostile takeover bid by smaller rival Sanofi-Synthelabo. The merger would have created the biggest drug company in the European market. Sanofi-Synthelabo, the maker of antistroke drug Plavix and the sleeping pill Ambien, closed down $2.71 at $34.30.

Drug maker Schering-Plough Corp. closed up 33 cents at $17.85 after its earnings missed estimates, largely owing to a decline in sales and a large restructuring charge. The maker of the allergy medicine Clarinex reported a loss for the year, a first since the company was formed by a 1970 merger.

Advancing issues outnumbered decliners about 5-to-4 on the New York Stock Exchange. Volume was moderate, with 1.44 billion shares traded, compared with 1.55 billion shares Friday.

The Russell 2000 Index, which tracks smaller-company stocks, was up 5.36, or 0.9 percent, at 601.50.

Overseas, Japan’s Nikkei stock average finished 2.8 percent higher. In Europe, France’s CAC-40 closed down 0.5 percent, Britain’s FTSE 100 lost 0.3 percent and Germany’s DAX index finished 0.6 percent lower.

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