Stocks resumed their upward march today as the Dow Jones industrial average posted its highest close for the year amid investor optimism over corporate profits and the economy.
“Clearly, the appetite for risk has come back, and everybody likes an up market,” said Matthew D. McCormick, a portfolio manager at Bahl & Gaynor Investment Counsel Inc. “I think a lot of this (rally) is based upon earnings numbers coming in better than expected.”
The good cheer over profits was kicked off early today by automaker Ford Motor Co., which returned to profitability in the second quarter. That news was followed by stronger-than-expected reports from drug makers Bristol-Myers-Squibb and Wyeth. Among others, AT&T and 3M reported declines in earnings that were smaller than analysts had expected.
The earnings news added to the happy sentiment on Wall Street that was set off by a report from the National Association of Realtors that existing home sales in June rose 3.6% to an annual rate of 4.89 million units compared with a revised 4.72 million in May. Economists had expected a rate of 4.84 million.
After snapping a seven-day rally on Wednesday, the Dow gained 188.03 points, or 2.12%, to 9,069.29. The last time the blue-chip barometer topped 9,000 was Jan. 6, when it closed at 9,015.10. Its highest close was Jan. 2, at 9,034.69
The S&P 500 index added 22.22 points, or 2.33%, to 976.29 and the Nasdaq composite rallied 47.22, or 2,45%, to 1,973.6. All numbers are preliminary.
Despite all the good cheer on Wall Street, some investors remained cautious.
“Many people I talk to on the institutional side do not believe this market has the legs to keep going higher,” Mr. McCormick said. “But we're all sitting here skeptical as the market rises.
“The market is showing remarkable strength considering the weak macro environment,” he added. “That's why investors ride a wall of worry.”
He said that while the market is being led by “small-cap, low-quality, high-beta” stocks, “if this market is going to continue to rally, it has to spill over and broaden out to high-quality stocks.”
