U.S. stocks at highest level of year on strong economic news

Meg Richards

Thursday, Oct. 9, 2003 | 11:22 a.m.

NEW YORK -- Investors pleased by positive economic news and upbeat earnings from Genentech and Yahoo! sent stocks sharply higher today, lifting the Dow Jones Industrial Average to a new high for the year.

After a month of mixed economic news, the market was especially cheered by the drop in new applications for jobless benefits, which the Labor Department said fell to 382,000 last week, beating analysts' estimate of 395,000.

That, coupled with rosy retail sales reports from Wal-Mart, the Gap Inc. and others, set a positive tone for the markets, said Jeff Swensen, senior trader at John Hancock Funds. "I think the jobless claims being a little bit lower turns the tide in the favor of the bulls," he said.

In early afternoon trading, the Dow Jones industrial average was up 129.34, or 1.3 percent, at 9,760.24 -- up from its closing high of 9659.13 on Sept 18.

The broader markets were also higher. The Nasdaq composite index rose 40.95, or 2.16 percent, to 1,934.73. The Standard & Poor's 500 index rose 13.30, or 1.3 percent, to 1,047.08.

Today marked the first anniversary of the stock market's reaching the bottom of its three-year slide. Since Oct. 9, 2002, the Dow has rebounded 33.95 percent from a five-year low, the Nasdaq is up 73.7 percent from its six-year low and the S&P 500 is up 34.8 percent from its six-year low.

The market got a lift from the Labor Department's report that new claims for unemployment insurance fell last week to their lowest level in eight months. Analysts said a decline in the pace of layoffs could signal companies are a bit more hopeful about the staying power of the economic recovery.

But investors were also focused on third-quarter earnings reports, looking for solid evidence the economy is improving. Trading volume has been light as many investors wait for the bulk of the reports, expected over the next two weeks.

In results issued after the market closed Wednesday, biotechnology company Genentech Inc. and Internet search engine Yahoo each reported strong earnings, beating analyst expectations.

Genentech saw a 70 percent jump in profits on strong sales of two cancer-fighting drugs and a one-time legal settlement. The company's results beat analyst expectations by 2 cents a share. Genentech was up $2.84, or 3.6 percent, at $81.59 today.

Yahoo doubled its earnings with strong revenue from advertising sales, and beat Wall Street forecasts by a penny a share. Yahoo was up $4.73, or 12.2 percent, at $43.52

Wal-Mart Stores Inc. rose 69 cents, or 1.2 percent, to $59.21, after the retailer reported sales at U.S. stores open at least a year rose 6 percent last month, beating its own expectations and analyst estimates.

The Gap Inc., which said same-store sales were up 13 percent last month, rose $1.01 per share, or 5.6 percent, to $19.20.

Computer Associates International Inc. was down $2.35, or 8.1 percent at $26.61 on news the firm had fired three top financial executives in the midst of a government accounting probe. An inquiry by the company's audit committee found the three had inappropriately recognized sales in advance of signed contracts.

Advancing issues outnumbered decliners almost 3 to 1 on the New York Stock Exchange. Volume came to 666.27 million shares, compared with 539.6 million traded at the same point Wednesday.

The Russell 2000 index, a barometer of smaller company stocks, rose 9.88, or 1.9 percent, to 525.56.

Overseas, Japan's Nikkei stock average finished 0.1 percent lower Monday. In Europe, France's CAC-40 advanced 2.4 percent, Britain's FTSE 100 rose 1.1 percent and Germany's DAX index gained 2.6 percent.