Stock prices surged higher Thursday in a rally fueled by declining oil prices and a positive economic signal from the bond market.
Stocks have now risen to the point where prices are approaching levels that for most of the year have triggered sell-offs. Some experts think that this time equities are positioned to break through those levels and move higher still.
After spending the morning stuck in negative territory the Dow Jones industrial average began to move smartly higher early in the afternoon. It ended the day up 93.89 points, or 0.89 percent, to close at 10,640.10.
More Top Picks Best Gaming Mouse Pad
With the upturn, equity markets have now risen in six of the last seven trading sessions. The renewed momentum–coming after a grueling, loss-plagued October–has renewed investors’ hopes for a year-end rally.
Historically, the market has racked its biggest gains of the year in the fourth quarter, often in the latter half via what’s sometimes referred to as the “Santa Claus Rally.”
“I think the market bottomed on Oct. 25 and this is now the start of the year-end rally,” said Alexander Paris of Barrington Research Associates in Chicago. “The market is now betting on a strong finish to the fourth quarter.”
The recent increase in formerly weak technology stocks supports that interpretation, he said, because the more volatile tech stocks rise relatively faster when a rally kicks in.
Paris isn’t the only market watcher who thinks an upturn–albeit one of still-to-be-determined strength and duration–is under way.
“Stocks resumed their year-end rally today, as oil prices slumped and a Treasury auction of 10-year notes attracted a record level of overseas demand,” said A.G. Edwards market strategist Alfred Goldman.
Indeed, stocks have now climbed near the levels that have served as a ceiling for much of 2005.
Every time the Dow has breached 10,700 over the past six months, for example, it has rapidly dropped lower. Over that same period, the broader Standard & Poor’s 500 index has fallen each time it reached a point between 1220 and 1240.
On Thursday the S&P climbed 10.31 points, or 0.84 percent, to close at 1230.96, its highest level since mid-September.
The technology-heavy Nasdaq composite showed an even stronger 0.96 percent increase, rising 20.87 to 2196.68. That’s the highest level for the Nasdaq since late summer, when the index briefly broke above 2200 before swiftly retreating.
In New York Mercantile Exchange trading, crude oil prices continued their recent downward trend, with oil for December delivery declining $1.13, to $57.80.
The blue chips were burdened by another drop in the stock of problem-plagued Dow component General Motors, which saw its shares drop 4.5 percent, to $23.51, the lowest price for the automaker’s stock since 1989.
Treasury bonds firmed Thursday, with the 10-year note rising 19/32, to yield 4.56 percent. The federal government had slated a major auction of 10-year notes and there had been concern that pricing might be weak because foreign investors have been reluctant to buy at such auctions. But overseas buyers jumped in Thursday, making the auction a major success–which in turn sparked the stock market’s afternoon rally.
Local stocks on the move:
– Shares of Cosi Inc., the Deerfield-based operator of convenience restaurants, were down as much as 9.2 percent early Thursday but ended off 3.2 percent, at $9. Even after Thursday’s slip, however, the company’s shares are still more than four times their price of two years ago. Year to date they are up 49 percent.
– Immtech International shares tumbled 17 percent, to $7.80, a new 52-week low for the pharmaceutical concern, after the Vernon Hills company reported disappointing quarterly results Wednesday evening.
– Hospira shares rose 9.5 percent, to $44.88, a 52-week high for the hospital products-maker. Hospira, a 2004 spinoff from Abbott Labs, reported solid operating results for the latest quarter and offered an upbeat forecast.
———-