cnn wall st report

Big rally on Wall Street
Dow 30 and S&P 500 end at fresh nearly 5-year highs on falling bond yields, lessening of rate hike worries.
By Alexandra Twin and Jessica Seid, CNNMoney.com staff writers
March 14, 2006: 4:13 PM EST


NEW YORK (CNNMoney.com) - Stocks surged Tuesday, with the Dow 30 and S&P 500 closing at fresh nearly 5-year highs, as sliding bond yields relieved worries about rising interest rates.

The Nasdaq composite (up 27.68 to 2,294.71, Charts) added 1.2 percent, thanks in part to a rallying chip sector.



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The broader Standard & Poor's 500 (up 13.03 to 1,297.16, Charts) index added around 1 percent, closing at its highest point since May 22, 2001. The Dow Jones industrial average (up 72.76 to 11,148.78, Charts) gained 0.7 percent, closing at its highest point since June 5, 2001.

The major gauges began the session near the unchanged line as strong earnings from Goldman Sachs competed with higher oil prices and a mild quarterly outlook from Procter & Gamble.

But the tone soon turned positive, as the higher oil prices fueled a rally in oil and other commodity stocks. Meanwhile, worries about rising interest rates eased amid a rally in bonds -- which was sparked by a report that suggested the Fed's rate hiking campaign could end soon.

"The Goldman Sachs news seemed to re-energize the bull market," said Hugh Johnson, chairman of asset management company Johnson Illington Advisors.

"That's the catalyst that got a lot of investors on board," he said, adding that the stock market also got a lot of help from a rally in the bond market.

What moved?
Goldman Sachs (up $8.31 to $149.03, Research) jumped 5 percent after reporting first-quarter earnings and revenue that rose from a year earlier and trounced estimates.

The strong earnings -- as well as falling Treasury bond yields -- gave a boost to the broader bank sector.

The Amex Securities Broker/Dealer (Charts) index gained 2 percent.

In addition to Goldman, other components on the rise included Bear Stearns (up $3.32 to $134.44, Research), Morgan Stanley (up $1.20 to $59.99, Research) and Lehman Brothers (up $3.04 to $145.26, Research), which all added more than 2 percent.

On the downside, Procter & Gamble (down $1.96 to $60.02, Research) lost 3 percent after the Dow component issued a milder-than-hoped-for third-quarter profit outlook late Monday.

The consumer products maker said sales would rise 5 to 6 percent versus an earlier projection of as much as 7 percent. The company also said earnings per share would be between 59 and 61 cents, versus analysts' forecasts for 61 cents.

The Dow's other big decliner was General Motors (down $0.27 to $21.10, Research), which fell 1.5 percent. Rival Ford (down $0.12 to $7.74, Research) also lost more than 1 percent, after credit rating agency Fitch downgraded its debt further into junk territory late Monday.

A slew of home building shares also rose, with the Dow Jones Home Construction (up $39.34 to $878.74, Research) index adding over 4 percent.

The influential chip sector was also higher, with the Philadelphia Semiconductor (up 11.15 to 511.08, Charts) index, or the SOX, up 2.2 percent.

Market breadth was positive. On the New York Stock Exchange, winners topped losers by seven to three on volume of 1.2 billion shares. On the Nasdaq, advancers edged decliners three to two on volume of 1.5 billion shares.

Retail sales disappoint
February retail sales fell a more-than-expected 1.3 percent, after rising 2.3 percent in January. Sales excluding autos eased 0.4 percent in February, a narrower drop than what Wall Street economists were expecting, on average.

The current account gap surged to a record $804.9 billion in 2005, the Commerce Department said. Later in the week, reports on manufacturing, housing, consumer sentiment and consumer prices are due.

U.S. light crude oil for April delivery added $1.33 to $63.10 a barrel on the New York Mercantile Exchange, a gain of more than two percent. Crude gained 3 percent Monday.

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 4.69 percent from 4.77 percent late Monday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar was weaker versus the euro and the yen.

COMEX