Late Burst Extends Stocks' Streak
Markets Nail Down Third Straight Monthly Gain as Oil Rises, Dollar Sinks
PETER A. MCKAY GEOFFREY ROGOW
Stocks jumped in the final half hour of trading Friday, capping a third straight months of gains with a flourish.
The major indexes bounced late in the day after spending most of the final session of the month swaying from gains to losses. The Dow Jones Industrial Average jumped 96.53 points, or 1.2%, to 8500.33. It rose 4.1% on the month and has risen 20% over the last three months -- the best three-month run since the period ending in November 1998.
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Traders noted that Merck, Pfizer and Coca-Cola, three of the best-performing stocks in the Dow this month, were among the leaders of the late-day burst as money managers stuffed client funds into winning stocks.
The Standard & Poor's 500-stock index rose 12.32 points, or 1.4%, to 919.15, leaving it up 5.3% on the month and up 25% in three months. The last time that the Dow and the S&P 500 rose three months in a row was in the stretch ending in October 2007, when both indexes reached record highs.
The Nasdaq Composite Index gained 22.54 points, or 1.3%, to 1774.33. It rose 3.3% in May and gained 29% over the last three months, the best three-month percentage gain since the three months ending in December 2001.
The market's spring gains have been driven by a widening consensus on Wall Street that the worst fallout of the financial crisis and recession has passed. However, some participants are increasingly worried about the timing of a recovery and whether stocks are too highly valued considering that the outlook for profits and dividends remains murky.
"There's a lot of trepidation right now about whether this rally can continue," said Doreen M. Mogavero, president of Mogavero, Lee & Co., a New York floor brokerage. "I think that's why you've seen light volume lately, because a lot of people just haven't figured it out."
Data on Friday were mixed. A revised report said U.S. gross domestic product contracted at a 5.7% annual rate in the first quarter, a shade better than the originally estimated 6.1% contraction. The revision was slightly smaller than economists expected -- a glum signal for stock investors. Meanwhile, consumer sentiment brightened somewhat, but data on Chicago-area manufacturing were weak.
The dollar dropped against major rivals following the GDP report. The U.S. Dollar Index, which measures the currency's value against six overseas rivals, declined 1.5%. The dollar was especially weak against so-called commodity currencies like the Australian dollar, which reached levels last seen in October.
Paresh Upadhyaya, currency portfolio manager at Putnam Investments, said the dollar has recently been undergoing an adjustment akin to one that has already taken place in currencies issued by other countries, including Britain and Switzerland, that have been printing money to prop up their local economies.
"The dollar was supported for awhile because there was a safety component to it," with some traders flocking to the greenback as a defensive play," said Mr. Upadhyaya. "But now that things are getting back to normal in the economy, it's moving away from being overvalued. People are looking at a prolonged period in which the Fed is likely to keep rates low."
The dollar's pullback helped to lift raw-materials prices. The broad Dow Jones-UBS Commodity Index gained 1.5%.
Crude-oil futures settled at $66.20 a barrel in New York trading, another six-month high, bolstered by improving confidence that global demand will catch up to currently robust global supplies. Oil has nearly doubled from its mid-February lows.
Surprisingly, given the push of oil prices and as General Motors drew closer to a bankruptcy filing, transport stocks surged. The Dow Jones Transportation Average gained 4.2%, led by CSX and Union Pacific, which each rose 8%.
"People have already baked in a $70 number for oil and that's probably the appropriate price. And, there are signs things are being transported with tanker loads, volumes and shipping improving," said Kelli Hill, a portfolio manager with Ashfield Capital Partners.
Treasury prices climbed. The benchmark 10-year note gained 1-10/32 to yield 3.454%, as the Fed's purchase Friday of agency bonds helped lure buyers back into longer-term government securities. Bonds and the dollar suffered in May amid worries about the amount of debt the U.S. government is taking on to stimulate the economy.
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