- The Washington Times - Tuesday, March 14, 2006

BLOOMBERG NEWS

U.S. stocks rallied to their highest levels since 2001 after bond yields tumbled and Goldman Sachs Group Inc. reported Wall Street’s biggest quarterly profit in history.

Brokerage stocks led the gain as Goldman, the first of the five largest U.S. investment banks to report earnings, said the industry outlook is as favorable as it has ever been. Shares of the New York firm jumped the most in three years.

Yields on 10-year Treasury notes saw their steepest slide this year after a larger-than-forecast drop in February retail sales signaled that the Federal Reserve has less reason to keep raising interest rates.

The Standard & Poor’s 500 Index rose for a third day, adding 13.35, or 1 percent, to 1297.48, its best close since May 2001 and the biggest advance since Jan. 3. The Dow Jones Industrial Average rallied 75.32, or 0.7 percent, to 11,151.34, the highest since June 2001. The Nasdaq Composite Index increased 28.87, or 1.3 percent, to 2295.90.

The market had its broadest rally in more than three months, with four stocks rising for every one that fell on the New York Stock Exchange.

Goldman surged $8.70, or 6.2 percent, to $149.42 for the second-largest gain in the S&P; 500. The world’s second-largest securities firm by market value said net income for the first quarter ended Feb. 24 surged to $2.48 billion, or $5.08 a share. Goldman’s earnings were greater than it netted in all of fiscal 2002 and topped the highest analyst estimate by more than 60 percent.

Financial shares were also boosted as the February report on retail sales eased speculation that inflation will spur the Fed to raise interest rates three more times this year. Higher rates reduce the value of bonds owned by banks, brokers and insurers, and also crimp demand for mortgages and loans.

The yield on the benchmark Treasury 10-year note lost 0.07 percentage point, to 4.70 percent, the biggest drop since Dec. 6. Stocks slipped earlier this month as 10-year yields reached the highest since the Fed’s rate increases began in June 2004.

Yields reached their low for the day after Medley Global Advisors, a company that provides research to hedge funds, said in a report that most Fed policy makers want to stop raising interest rates after one or two more quarter-point increases.

Retail sales decreased 1.3 percent in February for the first slide in six months as automobile purchases declined and cold weather discouraged shoppers, the Commerce Department said. Excluding autos, sales lost 0.4 percent. Economists in a Bloomberg News survey expected drops of 0.8 percent and 0.5 percent, respectively.

Google, the most-used Internet search engine, rose $14.10 to $351.16, snapping a six-day losing streak that was its longest on record. Google received a partially favorable ruling from a federal judge in its dispute with the Justice Department.

Shares of D.R. Horton Inc., Phelps Dodge Corp. and U.S. Steel Corp. gained after analysts raised the stocks’ ratings.

D.R. Horton, the largest U.S. homebuilder, added $2.13, or 6.8 percent, to $33.68 for the best performance in the S&P; 500. The stock was raised to “outperform” from “neutral” by analyst Ivy Zelman at Credit Suisse. D.R. Horton will earn 3 percent less this year compared with last year, the analyst wrote. Other homebuilders are expected to report a 12 percent profit decline.

A Commerce Department report showed that inventories at retailers, wholesalers and manufacturers rose 0.4 percent in January, following a revised 0.8 percent gain in December.

Economists expected an increase of 0.3 percent.

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