- The Washington Times - Tuesday, September 26, 2006

NEW YORK (AP) — Wall Street surged higher yesterday, carrying the Dow Jones Industrial Average to its second-best close ever as positive economic data further buoyed a growing sense of optimism among investors. The Dow closed just 54 points away from its record high close.

Stocks, particularly the blue chips, rose after the Conference Board said its consumer confidence index for September rose more than expected, reaching 104.5 from a revised reading of 100.2 in August. Analysts forecast the index would rise to 103.

Also bolstering investor enthusiasm was a report from the Federal Reserve Bank of Richmond that showed the region’s economy strengthened this month. The bank’s manufacturing index came in at 9 versus 3 in August.

Jack Albin, chief investment officer with Harris Private Bank, said the market’s advance reflects widespread investor enthusiasm and a realization that the Federal Reserve might have room to ease short-term interest rates. He pointed to low inflation and the recent nearly 20 percent pullback in oil prices.

“The Fed has a lot more elbow room to lower rates. The Fed could maybe even lower this year,” he said.

The Dow gained 93.58, or 0.81 percent, to 11,669.39, within range of its high of 11,722.98 set in January 2000.

Broader stock indicators also jumped sharply. The Standard & Poor’s 500 Index rose to a 5-year high, gaining 9.97, or 0.75 percent, to 1,336.34 and the Nasdaq Composite Index rose 12.27, or 0.55 percent, to 2,261.34.

Bonds fell after a sharp rally Monday in what was perhaps some profit-taking. The yield on the benchmark 10-year Treasury note rose to 4.58 percent from 4.54 percent late Monday. The dollar was mixed against other major currencies, while gold prices rose.

Investor sentiment has strengthened since the Fed’s August decision to leave interest rates unchanged after a two-year string of 17 straight increases. That enthusiasm became more widespread after the central bank held off again last week, signaling to investors that inflation remained within reasonable limits.

Recent reports on the health of the economy appeared to ease concerns by some analysts that the Fed had overreached in its bid to corral inflation. Aside from a disappointing report last week from the Philadelphia Fed about regional manufacturing activity, investors have grown increasingly confident as more economic findings have trickled out and oil prices have held lower long enough to make a difference at the pump.

Lowe’s rose 1 cent to $28.85, despite reducing its full-year profit forecast; it warned that a slowdown in the sector was hurting sales of its home-improvement products. Lennar rose 7 cents to $46.95 even after saying its third-quarter profit fell 39 percent amid sluggishness in the sector and the company, one of the country’s biggest home builders, trimmed its fourth-quarter forecast.

In technology, PMC-Sierra Inc., a maker of communications and storage chips, fell 55 cents or 8.4 percent, to $6 after cutting its third-quarter sales forecast to a range between $114 million to $116 million. It’s earlier range was $122 million to $124 million.

Innovex, a chip maker, fell 38 cents, or 13.7 percent, to $2.40, after warning its fourth-quarter sales could fall short of estimates.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.72 billion shares, compared with 1.75 billion traded Monday.

The Russell 2000 Index of smaller companies was up 2.52, or 0.35 percent, at 729.61.

Overseas, Japan’s Nikkei stock average fell 0.49 percent. Britain’s FTSE 100 closed up 1.30 percent, Germany’s DAX was up 1.00 percent, and France’s CAC-40 was up 1.42 pe

Light crude oil settled down 44 cents at $61.01 on the New York Mercantile Exchange. The slide in oil prices this month has given Wall Street investors optimism that consumer spending will hold up, even as the economy slows, and help protect corporate profits.

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