Tulsa World: Investors carry stocks higher

MAKE US YOUR HOMEPAGE | Tuesday, February 09, 2010 | WIRELESS

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Investors carry stocks higher
The dollar's slide and good home sales data send the Dow index to a 13-month high.

By Staff and Wire Reports
Published: 11/24/2009 2:22 AM
Last Modified: 11/24/2009 5:02 AM

The stock market ended a three-day losing streak Monday, closing broadly higher as a weaker dollar and upbeat home sales numbers encouraged investors to take on more risk.

Major stock indexes soared more than 1 percent, including the Dow Jones industrials, which rose 133 points to a 13-month high. Volume was light as Thanksgiving approached, and that likely padded some of the market's advance.

Investors who fled to the safety of the dollar and Treasury bills in recent days found plenty of reasons to return to stocks Monday. The day's developments pointed to two key trends, a recovering economy and interest rates that are expected to stay low:

The dollar resumed its long slide, sending prices for commodities including gold and oil higher and in turn, the stocks of companies that produce them.

The National Association of Realtors report that October home sales rose more than 10 percent revived investors' optimism after disappointing data on the housing industry last week raised concerns about the strength of the economic recovery.

Charles Evans, head of the Federal Reserve Bank of Chicago, was quoted as saying he saw little risk that the economy would slide back into recession, although unemployment is unlikely to fall until next summer. And James Bullard, president of the Fed bank in St. Louis, said the Fed should continue to buy mortgage-backed securities after the program is supposed to expire in March. That would continue to keep interest rates low.

"The stock market historically is a predictor of where the economy is going to go," said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa. "So it will start down before a recession, and most times it will come back before the end of a recession.

Some analysts are predicting an economic recovery by mid-2010, and the market is "right in line with that prediction," he said.

The market's rise is reinforcing some investors' belief that the upturn from the low point in March has staying power and is not a fluke, Dollarhide added.

"With inflation low, with optimism and consumer confidence coming back — all of the ingredients are there for a very health stock market in 2010," he said.

"So I think this recent run we've seen is in anticipation of that."

Low interest rates and the resulting slide in the dollar have been big drivers behind the stock market's eight-month rally.

Low interest rates allow investors to borrow cheaply and buy assets like stocks and commodities that have the potential to earn higher yields than cash.

Investors were buying Monday on somewhat contradictory forces. The strength in housing is a sign of an improving economy, which could argue in favor of raising rates, while the dollar's weakness points to rates remaining low.

Analysts say investors who still have plenty of available cash are primed to buy, and so the market may also be rising on its own momentum.

At the same time, some portfolio managers have cooled their buying, not wanting to risk losing the big returns they've made since stocks began rallying in March.

Those opposing forces are likely to result in choppy trading over the next few weeks, analysts said, which will be exacerbated by light volume as the holidays approach.

The Dow rose 132.79, or 1.3 percent, to 10,450.95, after losing 120 points over the previous three days. It was the Dow's highest close since Oct. 2, 2008.

The Standard & Poor's 500 index rose 14.86, or 1.4 percent, to 1,106.24, while the Nasdaq composite index rose 29.97, or 1.4 percent, to 2,176.01. The index is up 63.5 percent from a 12-year low in March.

The ICE Futures U.S. dollar index, a measure of the dollar against other major currencies, fell 0.7 percent. As the dollar fell, gold prices surged to a new high of $1,174 an ounce. Oil rose 9 cents to $77.56 a barrel.

The spike in commodities lifted energy companies and materials producers. Chevron Corp. rose $1.97, or 2.6 percent, to $78.74. Weyerhaeuser Co. gained $1.25, or 3.3 percent, to $39.11.

The National Association of Realtors said home sales rose 10.1 percent in October to the highest level in 2 1/2 years, spurred by a tax credit for first-time homebuyers. Analysts had been expecting a 1.4 percent increase in sales. The credit, due to end at the end of the month, has been extended into 2010.

In other trading, the Russell 2000 index of smaller companies rose 10.13, or 1.7 percent, to 594.81.

Laurie Winslow of the Tulsa World Business staff contributed to this story by The Associated Press.

By Staff and Wire Reports

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Daven, Tulsa (11/24/2009 1:57:38 PM)

Why is no one crying about this and blaming Obama? Oh, nevermind its good news. lol

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Corvetteguy, Tulsa (11/24/2009 4:06:15 PM)

Well,........President Obama has done it again.

Just when I was going to buy some stocks to do my part in stimulating the economy, the President allowed them to go up in value. Now I can't afford them.........

.........Just kidding Daven, but now you know how conservatives feel listening to dusty day, after day, after day, after day......

Have a great evening......

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