New month, new stock rally
The Dow closes above 13,000 for the first time in almost 4 months, as investors bet that the worst of the credit crisis has passed.
NEW YORK (CNNMoney.com) -- Stocks surged Thursday, starting off the new month with a bang, as investors hailed better-than-expected readings on manufacturing and consumer spending, one day after the Fed hinted the economic outlook seems to have stabilized.
The Dow Jones industrial average (INDU) gained 1.5% and closed above 13,000 for the first time since Jan. 3. The broader Standard & Poor's 500 (SPX) index gained 1.7% and the Nasdaq composite (COMP) added 2.5%.
The Federal Reserve on Wednesday cut the fed funds rate, a key short-term interest rate, by a quarter-percentage point, as expected. The central bank also hinted that since the economic outlook has not worsened, it will probably not need to keep cutting rates.
Wall Street's initial reaction was mixed, but after a slow start Thursday, stocks turned higher as investors reconsidered the Fed statement in light of other recent signs of recovery.
"The market is becoming comfortable with the fact that the Fed is in a 'wait and see' mode, with yesterday's cut likely the last for a while," said Fred Dickson, chief market strategist at D.A. Davidson & Co.
He said that after digesting the Fed statement, investors are seeing that the Fed is essentially sending the message that the worst of the credit crisis has passed, something stocks have been anticipating for the last month or so.
"I think they would have indicated in the statement if the economy had gotten worse, but they didn't," Dickson said. "They're hinting that we're not out of the woods, but the landscape is better."
Friday's focus will be on the April jobs report due out before the start of trade. Employers are expected to have cut 75,000 jobs from their payrolls after cutting 80,000 last month. The unemployment rate, generated by a separate survey, is expected to have risen to 5.2% from 5.1% the previous month.
Economic news: A busy day for economic news brought reports on income and spending, jobless claims, construction spending and manufacturing.
Personal income increased a less-than-expected 0.3% in March, while personal spending rose a greater-than-forecast 0.4%, the Commerce Department reported. The Core PCE deflator, the report's inflation component, jumped a greater-than-expected 0.2%. (Full story).
The number of Americans filing new claims for unemployment jumped by 35,000 last week, the government said, topping forecasts for a rise of 18,000. (Full story).
Construction spending fell 1.1% in March versus forecasts for a drop of 0.7%. Spending rose 0.4% in the previous month.
The ISM index of manufacturing activity held steady at 48.6 in April, unchanged from March. Economists thought it would fall to 48, according to Briefing.com. Any reading below 50 represents a slowdown in the sector.
Company news: Exxon Mobil (XOM, Fortune 500) reported sharply higher quarterly sales and earnings on surging oil prices, but results were shy of forecasts and the stock lost 3.6%.
JDS Uniphase (JDSU) reported fiscal third-quarter revenue that was short of estimates and warned that fourth-quarter profit would miss expectations, sending shares 16.4% lower in active Nasdaq trading.
But other big Nasdaq stocks were more positive. Symantec (SYMC, Fortune 500) rallied 12.3% after the security software maker reported strong fiscal fourth-quarter profits.
Other big Nasdaq movers included Intel (INTC, Fortune 500), Cisco Systems (CSCO, Fortune 500), Oracle (ORCL, Fortune 500) and Apple (AAPL, Fortune 500).
Among blue-chip advancers, financial shares rallied, including Citigroup (C, Fortune 500), Wachovia (WB, Fortune 500), JP Morgan (JPM, Fortune 500), Wells Fargo (WFC, Fortune 500) and Bank of America (BAC, Fortune 500).
In other news, Home Depot (HD, Fortune 500) said it will close 15 underperforming stores and will cut back on future store openings, sending shares 3.7% higher.
Market breadth was positive. On the New York Stock Exchange, winners topped losers seven to three on volume of 1.40 billion shares. On the Nasdaq, advancers topped decliners two to one on volume of 2.35 billion shares.
Commodities: Oil and gold prices dipped, while gas prices hit new highs.
U.S. light crude oil for June delivery fell 94 cents to settle at $112.52 a barrel on the New York Mercantile Exchange.
Meanwhile, the national average price for a gallon of regular unleaded gas hit an all-time record of $3.623, AAA reported. (Full story)
COMEX gold for June delivery fell $14.20 to settle at $865.10 an ounce.
Other markets: The dollar gained versus the euro and yen.
Treasury prices slumped as investors pulled money out of the safe-haven buy, raising the yield on the benchmark 10-year note to 3.76% from 3.72% late Thursday. Bond prices and yields move in opposite directions. 
