cs0564
11-17-2006, 12:24 AM
Another day, another record for the Dow
Stocks surge on optimism over falling consumer prices, raft of deals
NEW YORK - Stocks gained for a fifth straight session Thursday, with the Dow Jones industrial average achieving its third straight record close on optimism over falling prices and an economy that appears to be gliding in for a 'soft landing.'
The Labor Department said falling gas prices helped push the Consumer Price Index lower last month, and energy prices could head lower still as oil prices plunged on futures markets to their lowest level of the year.
Investors also took a cue from a wave of major acquisitions suggesting that the flurry of private equity buyouts would continue. Clear Channel Communications Inc., the giant owner of radio stations and billboards, is being taken private by investors in a deal worth nearly $19 billion news, while Reader’s Digest Association Inc. is going private in a $1.6 billion deal.
Stocks also gained after the Philadelphia Fed reported that its index of manufacturing conditions rose to 5.1 from negative 0.7 in October. A positive reading signifies growth. Regional economic conditions “improved slightly” in November, but indicators for new orders and employment weakened.
Ethan Harris, chief U.S. economist at Lehman Bros., said stocks are likely to keep rising because of strong corporate profits and balance sheets, even as the overall economy could show strains.
“It’s much too early to declare victory over inflation,” Harris said. “You’ve got a significant amount of labor cost pressure building. Labor costs are a double whammy for stocks because they can slice into earnings and they can mean a tougher Federal Reserve.”
Kim Caughey, equity research analyst at Fort Pitt Capital Group, also remains concerned about wage increases but notes that third quarter profits were generated when energy costs were higher. Crude hit its high for the year in July.
“I think these numbers validated the thesis about energy prices having been the main component of inflation early this year,” she said of the Consumer Price Index, adding that she is now mainly concerned about increases in wages.
The Dow Jones industrial average finished the day up 54.11 points, or 0.4 percent. It was the 17th time the index has hit a record close since early October.
Financials and the consumer discretionary sectors led the rally, while energy stocks moved lower as commodity prices fell. The price of light, sweet crude fell more than $2 a barrel to its lowest level of the year on the New York Mercantile Exchange.
Bonds fell sharply, with the yield on the benchmark 10-year Treasury note rising to 4.66 percent from 4.62 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.
In economic news, the 0.5 percent drop in the Consumer Price Index, the key measure of inflation, matched the decline in September and marked the first two-month drop since late last year. The core inflation figure, which strips out volatility-prone prices for food and energy, rose 0.1 percent, the smallest increase in eight months.
http://www.msnbc.msn.com/id/3683270/
Stocks surge on optimism over falling consumer prices, raft of deals
NEW YORK - Stocks gained for a fifth straight session Thursday, with the Dow Jones industrial average achieving its third straight record close on optimism over falling prices and an economy that appears to be gliding in for a 'soft landing.'
The Labor Department said falling gas prices helped push the Consumer Price Index lower last month, and energy prices could head lower still as oil prices plunged on futures markets to their lowest level of the year.
Investors also took a cue from a wave of major acquisitions suggesting that the flurry of private equity buyouts would continue. Clear Channel Communications Inc., the giant owner of radio stations and billboards, is being taken private by investors in a deal worth nearly $19 billion news, while Reader’s Digest Association Inc. is going private in a $1.6 billion deal.
Stocks also gained after the Philadelphia Fed reported that its index of manufacturing conditions rose to 5.1 from negative 0.7 in October. A positive reading signifies growth. Regional economic conditions “improved slightly” in November, but indicators for new orders and employment weakened.
Ethan Harris, chief U.S. economist at Lehman Bros., said stocks are likely to keep rising because of strong corporate profits and balance sheets, even as the overall economy could show strains.
“It’s much too early to declare victory over inflation,” Harris said. “You’ve got a significant amount of labor cost pressure building. Labor costs are a double whammy for stocks because they can slice into earnings and they can mean a tougher Federal Reserve.”
Kim Caughey, equity research analyst at Fort Pitt Capital Group, also remains concerned about wage increases but notes that third quarter profits were generated when energy costs were higher. Crude hit its high for the year in July.
“I think these numbers validated the thesis about energy prices having been the main component of inflation early this year,” she said of the Consumer Price Index, adding that she is now mainly concerned about increases in wages.
The Dow Jones industrial average finished the day up 54.11 points, or 0.4 percent. It was the 17th time the index has hit a record close since early October.
Financials and the consumer discretionary sectors led the rally, while energy stocks moved lower as commodity prices fell. The price of light, sweet crude fell more than $2 a barrel to its lowest level of the year on the New York Mercantile Exchange.
Bonds fell sharply, with the yield on the benchmark 10-year Treasury note rising to 4.66 percent from 4.62 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.
In economic news, the 0.5 percent drop in the Consumer Price Index, the key measure of inflation, matched the decline in September and marked the first two-month drop since late last year. The core inflation figure, which strips out volatility-prone prices for food and energy, rose 0.1 percent, the smallest increase in eight months.
http://www.msnbc.msn.com/id/3683270/