NEW YORK (CNNfn) - U.S. stocks rallied for the first time this week Thursday after the government said consumer spending slowed last month, easing investors' worst fears about rising inflation.|
The surprise April downturn - if it's a trend - could keep Federal Reserve inflation fighters from aggressively raising interest rates ahead. For a stock market hammered by fears of tighter credit, that hope brought relief.
"You've got a lot of money on the sidelines that wants to get into the stock market," John Eade, director of equity research at Argus Research, told CNNfn's Talking Stocks. "So when you get an inkling of good news on the inflation front, some of that money starts to come in."
Much of that money came into tech stocks pummeled over the last three sessions.
Lifted by Intel, Oracle and JDS Uniphase, the Nasdaq composite index rose 114.84 or 3.4 percent, to 3,499.58, reversing some of its 432-point three-day loss. The Dow gained 178.19 to 10,545.97. The S&P 500 rose 24.76 to 1,407.81, its first gain all week.
"We had some relatively positive news for the markets, the first positive news we've had for some time," said Art Hogan, chief market analyst at Jefferies & Co. "Plus, we are very oversold after (Wednesday's) action."
For a change, more stocks rose than fell. Advancing issues on the New York Stock Exchange beat declining ones 1,946 to 999. Trading volume reached 952 million shares. Nasdaq winners topped losers 2,511 to 1,490 as more than 1.4 billion shares changed hands.
In other markets, Treasury securities were mixed. The dollar slipped against the yen but climbed versus the euro.
Consumer spending slows
Retail sales took an unexpected dip in April, falling 0.2 percent, the Commerce Department said. Analysts surveyed by Briefing.com expected a 0.5 percent increase.
For a market fretting about a large interest rate hike next week, the slowdown caused relief among stocks investors fearing that sharply tighter credit will crimp corporate profitability.
"It's the first piece of news indicating the economy may be slowing a bit," Bill Leszinske, president of Harris Bank, told CNNfn's market coverage.
But some analysts said the slowdown, the first in nearly two years, could be an aberration. A more important read on inflation comes Friday with April's producer price index.
"We've seen pauses in sales before; (it's) too soon to call this a trend," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Alan Skrainka, chief market strategist at Edward Jones, agreed.
"Wishful is a good way to describe it; the outlook for the U.S. economy doesn't change on a dime," Skrainka told CNNfn's market coverage. "We don't see signs of a slowdown and we do think the Fed will have work to do after next Tuesday's meeting."
But for at least one day, investors acted as if the economy may in fact slow without more rate hikes.
Financial stocks, ever sensitive to tighter credit, rose. J.P. Morgan (JPM: Research, Estimates) surged 5 to 127-5/8, American Express (AXP: Research, Estimates) gained 1-11/16 to 49-1/2, and Citigroup (C: Research, Estimates) rose 2-1/2 to 58-15/16
The Fed, the nation's central bank, is expected to tighten credit for the sixth time since last June at a policy makers meeting Tuesday. Although the prior five increases were a quarter percentage point each, many analysts believe the Fed will raise rates by a half point at the meeting.
William Sullivan, money market economist at Morgan Stanley Dean Witter, is among them.
"We still have the legacy of last week's job report," he told CNN's Street Sweep, referring to news that unemployment fell to a 30-year low in April.
Still, money flowed back into technology stocks hard hit since the Nasdaq reached its high of 5,048 two months ago.
Cisco Systems (CSCO: Research, Estimates) rose 1-3/4 to 60-1/4. The maker of computer networking equipment fell sharply this week on concerns about its lofty market valuation.
Oracle (ORCL: Research, Estimates) gained 4-3/4 to 72-3/8, JDS Uniphase (JDSU: Research, Estimates) climbed 6-5/16, and Intel (INTC: Research, Estimates) jumped 9-1/2 to 115-9/16.
Shares of Microsoft (MSFT: Research, Estimates), which have lost nearly half their value this year, rose 1-11/16 to 67-7/8. The software maker late Wednesday asked a federal judge to reject the government's breakup proposal in its antitrust case.
Applied Materials (AMAT: Research, Estimates) gained 5/8 to 85-1/4. The chip equipment maker said late Wednesday that quarterly earnings more than tripled to 55 cents a share.
Dell Computer (DELL: Research, Estimates) shed 1/4 to 44-11/16. But its shares may rise Friday. The nation's No. 2 computer maker after the close of trading Thursday posted first-quarter earnings of 19 cents a share, soundly beating the 16-cent-a-share forecast expected by Wall Street.
One analyst said Dell's strong report could spark broader gains Friday.
"I think we could have a spillover effect," Ralph Acampora, chief technical analyst at Prudential Securities told CNN's Street Sweep.
Looking ahead, Acampora sees value in real estate investment trusts, hard hit for much of the year.
Similarly, Alan Snyder, money manager at Snyder Capital Management in, told CNNfn's Market Coverage that the market may continue punishing less tested companies while rewarding ones with solid fundamentals. (354K WAV) (354K AIFF)