Investors Show Faith in Economy, Pushing Markets Higher

BLOOMBERG NEWS
August 17, 2004

Stocks rallied yesterday from this year's lows, as profit from Kmart and Lowe's, along with a drop in crude oil prices, suggested that the economy can sustain growth.

The Standard & Poor's 500-stock index rose 14.54 points, or 1.4 percent, to 1,079.34, for its second-biggest gain this year. The Nasdaq composite index increased 25.62 points, or 1.5 percent, to 1,782.84. The Dow Jones industrial average advanced 129.20 points, or 1.3 percent, to 9,954.55, as 28 of 30 stocks climbed.

The S.& P. 500 reached its 2004 low last week on concern that record oil prices would restrain consumer spending. The S.& P. 500 has shed 2.9 percent this year. The Dow has dropped 4.8 percent.

Three stocks rose yesterday for every one that fell on the New York Stock Exchange. About 1.2 billion shares changed hands on the Big Board, 11 percent less than the three-month daily average.

Kmart, the discount retailer, soared $11.15, or 17 percent, to $76.05. The company reported second-quarter earnings of $1.54 a share, a third consecutive quarterly profit. It had a loss of 6 cents a share a year ago.

Lowe's, the home improvement chain, climbed $2.49, or 5.3 percent, to $49.14. The company said third-quarter profit would be as much as 66 cents, 2 cents more than expected.

Taken together, the 30 stocks in the S.& P.500 retailing index advanced 2.8 percent, the biggest gain among the 24 industry groups in the S.& P. 500. Shares in the Kohl's Corporation jumped $1.07, to close at $47.17. Tiffany & Company, the No. 1 United States luxury jewelry retailer, gained $2.05, or 7.4 percent, to close at $29.75, for the second-biggest percentage increase in the S.& P. 500.

Wal-Mart Stores, the world's largest retailer, added 90 cents, to close at $54.30. The company said that an increase in August sales was meeting expectations, after shoppers in the eastern United States stocked up on food and water ahead of last week's major storms.

Pier 1 Imports rose 77 cents, to $16.24; Warren Buffett's Berkshire Hathaway bought eight million shares of the company, according to a filing with the Securities and Exchange Commission.

Crude oil dropped 1.1 percent and settled at $46.05 a barrel on the New York Mercantile Exchange. The victory of Venezuela's president, Hugo Chavez, in a weekend referendum eased concern that shipments from the country would be disrupted. Oil prices climbed 6 percent last week and gained earlier yesterday to a record $46.91.

An index of producers of raw materials climbed 2.7 percent as the price of oil fell. Alcoa, the world's largest aluminum maker, added $1.18, or 4 percent, to $30.81, for the biggest advance in the Dow average. Phelps Dodge, the copper producer, rose $2.77, to $79.45. Louisiana-Pacific, the biggest North American maker of wood panels for floors and roofs, added 71 cents to $23.45.

Investors shifted into stocks that have lagged in 2004, including those of materials producers, and out of some better performers, including energy companies and utilities.

An index of 27 energy companies rose 0.6 percent yesterday, after rising 12 percent this year. The utilities group added 0.7 percent; it is up 5 percent for the year.

Gateway, the unprofitable computer maker that closed its retail stores in April, added 33 cents to close at $4.11. The company said CompUSA would begin selling its desktop computers this week.

The Sysco Corporation, North America's largest food-service distributor, lost $2.44, to close at $31. Sysco said profit for the fourth quarter was 43 cents a share, 2 cents lower than the estimate of analysts surveyed by Thomson First Call.

Treasuries fell on concern that yields near a four-month low do not reflect forecasts for the Federal Reserve to raise target interest rate in September. By late in the day, the price of the benchmark 10-year note fell 10/32 to 99 28/32. The yield, which moves in the opposite direction of the price, rose to 4.26 percent, from 4.23 percent on Friday.

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