- The Washington Times - Monday, May 3, 2004

NEW YORK (AP) — Wall Street put aside its worries over interest rates yesterday and managed a halfhearted rally on the eve of a key Federal Reserve meeting.

The buying was fueled by positive economic data. The Commerce Department reported that construction spending jumped by 1.5 percent in March from February to a seasonally adjusted annual rate of $944.1 billion, the highest level on record. The increase was three times higher than economists expected.

Manufacturing growth slowed slightly in April because of higher costs for materials, according to the Institute for Supply Management’s manufacturing index. However, the growth was still considered strong for the month.

Nonetheless, with trading volume light and prices falling from their session highs through the afternoon, the bounce from last week’s selling was unlikely to be a signal of an overall turnaround — especially with the markets sensitive to any change in the Fed’s stance.

“I don’t think this was so much about the economic data. I think the market was just oversold coming into today,” said Russ Koesterich, U.S. equity strategist at State Street Corp. “The economic data was good but not great. With the low volume, this rally is not really convincing.”

The Dow Jones Industrial Averagerose 88.43, or 0.9 percent, to 10,314 after falling 2.4 percent the previous week.

Broader stock indicators were also strongly higher. The Standard & Poor’s 500 index gained 10.19, or 0.9 percent, to 1,117.49 after last week’s 2.9 percent drop. The Nasdaq Composite Index was up 18.57, or 1 percent, at 1,938.72 on the heels of a 6.4 percent skid the previous week.

While a rate increase is not expected at today’s meeting, the Fed’s statement after the gathering is expected to be thoroughly dissected by Wall Street. As the economy continues to grow at a rapid pace, most investors expect an interest-rate increase by August to combat inflation.

“The Fed is going to telegraph its intentions for the market in its statement tomorrow,” said Keith Keenan, vice president of institutional trading at Wall Street Access. “I can’t imagine they’d shock the market with a hike tomorrow, but rather they’ll get everyone ready for something in June or August. Overall, I think there’s the potential for a somewhat positive response on the market tomorrow, depending on what they say.”

Warren Buffett, chairman of Berkshire Hathaway Inc., told investors over the weekend the holding company has already shifted its assets in anticipation of rising rates. After its annual meeting this weekend, “A” shares of Berkshire Hathaway fell $490 to $92,900 per share.

Signs of life in the technology sector helped semiconductor stocks. Global semiconductor sales rose 32.3 percent year-over-year, according to an industry report. Chip maker Intel Corp. gained 31 cents to $26.04, Advanced Micro Devices Inc. was unchanged at $14.22, and chip equipment maker Applied Materials Inc. fell 15 cents to $18.12.

Sara Lee Corp. announced it has hired former PepsiCo Inc. executive Brenda Barnes as president and chief operating officer. The food producer and apparel maker climbed 29 cents to $23.37.

InterActiveCorp, which runs Ticketmaster and the Home Shopping Network, was down $1.19 at $31.06 after it swung to a profit in the first quarter based on strong growth in its core businesses.

Adobe Systems adjusted its second-quarter outlook, saying increased sales of its document reader and management software would help the company exceed previous estimates. Adobe jumped $2.50 to $44.

Advancing issues outnumbered decliners by nearly 3 to 2 on the New York Stock Exchange, where volume came to 1.56 billion shares, compared with 1.63 billion on Friday.

The Russell 2000 index of smaller companies rose 5.68, or 1 percent, to 565.48.

Overseas, markets in Britain and Japan were closed for holidays. Germany’s DAX index climbed 0.6, and France’s CAC-40 was up 0.9 percent for the session.

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