NEW YORK (AP) — Wall Street extended its advance into a sixth straight week yesterday after a brokerage upgrade of IBM raised investor expectations of a rebounding economy. The Nasdaq Composite Index reached an 18-month high.
“What’s driving things today is you’re continuing to see upgrades and better earnings out of technology from companies such as IBM,” said Russ Koesterich, U.S. equity strategist at State Street Corp. in Boston.
“You’ve got a lot of people who missed the early part of the rally back in March and April who are playing catch-up,” he added. “That’s helped by the fact that we’ve had unambivalently good economic numbers with the exception of the labor front.”
The Nasdaq gained 30.38, or 1.6 percent, to 1,888.62, following a weekly advance of 2.6 percent. It was the highest closing level since March 12, 2002, when the technology-focused index stood at 1,897.12.
The blue chips also finished higher. The Dow Jones industrial average closed up 82.95, or 0.9 percent, at 9,586.29. Last week, the blue chips gained 0.9 percent to post their fifth-straight winning week despite an 84-point loss Friday on a weak employment report.
And the Standard & Poor’s 500 index rose 10.25, or 1 percent, to 1,031.64, having risen 1.3 percent last week. Yesterday’s close represented a fresh 14-month high; it was the best close since June 18, 2002.
IBM Corp. climbed $2.15 to $89.10 after Credit Suisse First Boston upgraded the computer company’s stock rating to “outperform” from “neutral.”
Stocks have climbed in recent weeks on growing investor expectations of a strong economic recovery. But analysts caution that the market, having advanced quickly, might be poised for a pullback, particularly when companies begin issuing earnings warnings later this month.
Indeed, stocks retreated Friday after a Labor Department report that companies slashed payrolls by 93,000, a report that underscored fears that tepid employment could undermine the economic recovery.
Yesterday’s upgrades of IBM and other companies, however, helped soothe concerns of a slowing rebound.
“One of two things will stop the market rally — further evidence the labor market is either flat or deteriorating,” Mr. Koesterich said.
The other risk, he said, was a continued rise in interest rates that could dampen consumer spending.
Ed Peters, chief investment officer at PanAgora Asset Management Inc., agreed.
“I’m a little concerned about the recent run-up. The market is up a lot,” he said.
“We still haven’t seen the kind of growth, especially with bond yields where they are now, to justify a much further advance at this point.”