Jump in Consumer Confidence Boosts Wall Street
Investors set aside some of their worries about the economy Tuesday after a closely watched measure of consumer confidence soared in April.
Stocks fluctuated in a narrow range as concerns about the spread of swine flu and the viability of banks were eased when the Conference Board reported that its Consumer Confidence Index surged to its highest level since November.
IBM Corp.‘s decision to boost its dividend and spend more to buy back stock also gave the market a shot of confidence.
In midafternoon trading, the Dow Jones industrial average rose 29.86, or 0.4 percent, to 8,054.86 after being down as much as 86 ahead of the report.
Broader stock indicators also rose but remained volatile. The Standard & Poor’s 500 index rose 2.30, or 0.3 percent, to 859.81, and the Nasdaq composite index rose 1.20, or 0.1 percent, to 1,680.61.
Todd Leone, managing director of equity trading at Cowen & Co., said investors have been growing more upbeat about prospects for the economy. That optimism followed a string of better-than-expected readings and has driven a market rally since early March.
“People aren’t as afraid as they have been. We’re definitely seeing more money come back into the market,” he said.
That optimism took a hit ahead of the confidence reading as investors worried that a growth in swine flu cases could hurt industries such as travel and tourism. The World Health Organization raised its alert to Phase 4 out of 6, saying the flu spreads easily but is not a pandemic.
Banking troubles came back into the spotlight after news came out that regulators told Bank of America Corp. and Citigroup Inc. that they may need to raise more capital unless they can convince regulators that results of government “stress tests” were mistaken.
Bank of America fell 60 cents, or 6.7 percent, to $8.32, while Citigroup fell 14 cents, or 4.6 percent, to $2.93.
But the report on consumer confidence bolstered hopes that consumers not unemployed or struggling with debt might begin to step up their spending.
Some stocks that depend on consumer spending rose after the Conference Board said its index jumped 12 points to 39.2 this month. The reading was far better than the 29.5 that economists had expected, and suggests consumers might be willing to spend more if confidence continues to build.
Starbucks Corp. rose 48 cents, or 3.6 percent, to $13.68, while Coca-Cola Co. advanced 14 cents to $42.38.
IBM rose $1.84, or 1.8 percent, to $101.79 after the company raised its quarterly dividend 5 cents to 55 cents. The company’s board authorized another $3 billion for repurchasing stock. The move brings the total available for buying up shares to $6.7 billion.
“IBM’s buyback and dividend hike has given the market some confidence and reminded people that there is a little bit of favorable news in technology,” said Nick Kalivas, vice president of financial research at the brokerage MF Global in Chicago.
Unlike other major benchmarks, the tech-heavy Nasdaq composite index is up 6.5 percent this year as investors look for lean technology companies to benefit quickly from an economic recovery.
Investors responded more to news about individual stocks rather than buying entire industries, as had been the case in recent months when traders placed bets on consumer staples and technology companies expected to better endure the recession.
In other corporate news, Office Depot Inc. jumped 43 cents, or 17 percent, to $2.96 after its first-quarter loss wasn’t as bad as Wall Street feared.
Fortune Brands Inc., a maker of consumer products including Jim Beam bourbon and Titleist golf balls, rose $1.92, or 5.3 percent, to $38.44 after predicting its first-quarter earnings will beat analyst expectations.
The swine flu gave investors reason to cash in recent gains Monday, but the Dow is still up 22.6 percent from the nearly 12-year low it reached in early March.
In other trading Tuesday, the Russell 2000 index of smaller companies rose 5.62, or 1.2 percent, to 475.15.
Bond prices fell, pushing the yield on the 10-year Treasury note up to 2.98 percent from 2.91 percent.
The dollar was mostly higher against other major currencies. Gold prices fell.
Light, sweet crude fell 37 cents to $49.77 a barrel on the New York Mercantile Exchange.
About four stocks rose for every three that fell on the New York Stock Exchange, where volume came to a light 761.6 million shares.
Overseas, Japan’s Nikkei stock average fell 2.7 percent. In Europe, Britain’s FTSE 100 fell 1.7 percent, Germany’s DAX index fell 1.9 percent and France’s CAC-40 fell 1.7 percent.
4/28/2009 2:42 PM MADLEN READ AP Business Writers NEW YORK (AP)