- The Washington Times - Monday, June 1, 2009


Wall Street posted gains Monday, extending its rally into a fourth month on upbeat news about the U.S. and global economies.

The Dow Jones Industrial Average closed at 8,721.44, up 221.11 points. The broader Standard & Poor’s 500-stocks Index closed at 942.87, up 23.73 points, and the tech-heavy NASDAQ closed at 1,828.68, up 54.35 points.

The gains followed increases in foreign markets, after surveys in Europe and Asia showed overseas manufacturing is improving.

Japan’s Nikkei stock average rose 1.63 percent. Britain’s FTSE 100 rose 2.0 percent, Germany’s DAX index rose 4.08 percent, and France’s CAC-40 rose 3.11 percent.

The Institute for Supply Management said the U.S. manufacturing sector is still contracting, but did so in May at a slower pace than in April. The group’s manufacturing index rose to 42.8 last month, compared to 40.1 in April. The group attributed the gain to an increase in purchase orders.

The gains also followed the Commerce Department saying consumers reduced spending in April by 0.1 percent in April, better than analysts expected and less than the 0.2 percent drop in March.

The agency reported personal income increased by 0.5 percent and disposable income increased by 1.1 percent, in part because of reduced income taxes and extended unemployment benefits in the American Recovery and Reinvestment Act of 2009.

Construction spending increased in April by 0.8 percent — the second straight month for an increase.

“The manufacturing data seems to indicate demand is improving,” said Brian Lipps, a Charles Schwab & Co. vice president. “We’ve been working off inventory and now it’s extremely low. So demand for goods is increasing. That’s obviously a positive.” He also said General Motors Corp. filing Monday for bankruptcy had little impact on the markets because it was long expected.

The reorganization plan gives the U.S. government a 60 percent stake in the automaker.

President Obama said GM will receive an additional $30 billion, on top of the $20 billion the government has already given the company.

“We’re making the investment not because I want to spend Americans’ tax dollars,” he said. “I want to protect them.”

A federal bankruptcy judge Sunday night approved the sale of Chrysler LLC to a new company run by Italian carmaker Fiat.

The president said the GM restructuring will likely take longer than Chrysler’s because the company is larger and more complex.

Fritz Henderson, GM’s chief executive officer, said Monday afternoon he expects the company to emerge from bankruptcy in 60 to 90 days.

The Dow dropped GM from trading because of the bankruptcy and replaced it with the computer network supplier Cisco Systems Inc. (CSCO.)

“The parlous state of GM has left us with no choice but to remove it from the Dow,” said Robert Thomson, managing editor of the Wall Street Journal and editor-in-chief for all of Dow Jones. “A bankruptcy filing immediately disqualifies a stock regardless of a company’s history or its role as a cultural icon.”

The Dow also dropped Citigroup because of the federal government’s large financial stake during restructuring and replaced it with Travelers Companies Inc. (TRV.) The changes take effect at the opening of trading June 8.

Citibank stock closed at $3.69, down 3 cents.

Ford Motor Co. is the only one of the country’s Big Three automakers that did not receive a government bailout or declare bankruptcy.

Ford stock closed at $6.13, up 38 cents.

The markets are up roughly 25 percent since hitting a 12-year low in early March with analysts saying major U.S. banks and most other sectors of the economy appear to be stabilizing.

The S&P index is up 35.9 percent, and the NASDAQ is up 39.9 percent. The Dow is up 29.8 percent but still down roughly 40 percent from its October 2007 high.

The rally has wavered in the past few weeks as investors look for clearer signs about when the 19-month-long recession will end.

Among the new concerns are the global economy, rising interest rates, the sinking dollar and the increasing price of oil and other commodities.

Government bond prices fell again Monday, returning yields toward last week’s highs. The yield on the 10-year Treasury note, a benchmark for mortgages and other consumer loans, climbed to 3.68 percent from 3.46 percent Friday.

The dollar fell against the euro while the prices of oil increased.

Light, sweet crude increased $2.27, to $68.58 a barrel, Monday on the New York Mercantile Exchange.

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