Stocks end up, but off their peaks
Nasdaq ends at 8-month high and S&P 500 at 7-month high. Dow has highest close since Jan. 6 but stays down for 2009.
NEW YORK (CNNMoney.com) -- Stocks ended modestly higher Thursday, with all three major gauges closing at multi-month highs after the day's economic reports fed hopes that a recovery is brewing.
The Dow Jones industrial average (INDU) gained nearly 32 points, or 0.4%. Despite falling short of its 2008 finish, the index ended at its highest level since Jan. 6.
The S&P 500 (SPX) index added over 5 points, or 0.6% and closed at its highest point since Nov. 5.
The Nasdaq composite (COMP) climbed 9 points, or 0.5% and closed at the highest point since Oct. 6.
Stocks have been on the rise since bottoming March 9, with the Dow up 34%, the S&P 500 up 40% and the Nasdaq up 47%, as of Thursday's close.
But stocks have seesawed this week after rising Treasury yields and higher commodity prices sparked worries about inflation hampering a burgeoning recovery.
Thursday restarted the advance, as a rise in retail sales and a bigger-than-expected dip in jobless claims raised hopes that the pace of the recession is slowing. But the early advance lost momentum; the S&P 500 failed to hold on after briefly hitting a key level that traders and other market pros watch.
Nonetheless, the trend remains upward.
"The market keeps chugging along and it's pretty impressive," said Michael Church, president at Addison Capital. "None of the economic data screams outright recovery, but the market tends to move first."
He said that the runup has been liquidity driven, with investors not wanting to miss the boat, even after three months of gains. However, the pace of the advance has been slowing lately and that's bound to continue.
He said that the immediate concern over the next few weeks is the rise in interest rates.
On Friday, May import and export prices are due from the Labor Department. Also, the University of Michigan releases its June consumer sentiment index.
Bonds: A comparatively strong 30-year bond auction Thursday helped temper worries about pricing pressures, at least in the short term.
Treasury prices jumped, lowering the corresponding yields. The benchmark 10-year note yield fell to 3.85%, down from 4% early Thursday morning. The yield touched 4% during Wednesday's session for the first time since last October.
Economy: Retail sales climbed 0.5% in May, the Commerce Department reported. The report was in line with forecasts and showed an improvement from April, when sales fell a revised 0.2%.
Sales excluding autos rose a bigger-than-expected 0.5%. Economists surveyed by Briefing.com thought sales without volatile autos would rise 0.2% after falling a revised 0.2% in April.
But the report mostly reflects the recent rise in gas prices, rather than any new direction for the consumer, said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc.
"Basically the consumer is still dead in the water," he said. "We're not going to see a rise in consumer spending in the second quarter like we did in the first. Household balance sheets are a disaster."
A Federal Reserve report showed Americans saw $1.3 trillion in wealth disappear in the first quarter of this year, as home values declined and the stock market tanked. But the rate of decline was slower than last year. In the fourth quarter alone, $5.1 trillion in wealth disappeared, the biggest quarterly plunge since the Fed started tracking data in 1951.
Another report showed that foreclosure filings fell 6% in May from April, but still saw the third-worst month on record. The report showed that one of every 398 households received some kind of filing in the month, including notices of default, scheduled auctions or bank repossession.
The number of Americans filing new claims for unemployment fell 24,000 to 601,000 last week, according to a Labor Department report released Thursday morning. Economists though claims would dip to 615,000.
However, continuing claims, the number of Americans who have been receiving benefits for a week or more, rose to 6,816,000 from a revised 6,757,000 in the previous week.
BofA: Bank of America (BAC, Fortune 500) CEO Ken Lewis stressed Thursday that pressure from the government played a key role in the company's decision to complete its purchase of Merrill Lynch last year.
Lewis said the federal government threatened to remove management or board members if the company went back on its promise to buy Merrill, even though Merrill's financial state was deteriorating.
Other markets: In global trading, Asian markets ended mixed and European bourses ended higher.
In currency trading, the dollar fell versus the euro and the yen.
U.S. light crude oil for July delivery rose $1.35 to settle at $72.68 a barrel on the New York Mercantile Exchange, the highest close since October.
COMEX gold for August delivery rose $7.30 to settle at $962 an ounce.
Market breadth was positive and volume on the New York Stock Exchange was light for the fourth session in a row. On the New York Stock Exchange, winners beat losers three to two on volume of 1.22 billion shares. On the Nasdaq, advancers topped decliners nine to five on volume of 2.49 billion shares.
Has the recession actually helped you? From lower debt payments to cheaper home prices, many people have benefited from the current downturn. If you've made out financially and want to share your story, please email steve.hargreaves@turner.com.
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