Pescod says...

Holy bull!

Holy bull!

RTGAM


Investors who believe that the North American stocks are merely caught up in a bear market rally, taking a temporary breather from their long-term decline, must have felt a peculiar pain in their stomachs on Thursday: For the second day running, major indexes shrugged off midday jitters to post sizable gains in the afternoon, raising eyebrows as they blew past technical hurdles.


The Dow Jones industrial average closed at 7924.56, up 174.75 points, or 2.3 per cent. The broader S&P 500 closed at 832.86, up 18.98 points, or 2.3 per cent. The index has now risen nearly 25 per cent from its intraday low in early March, hinting at a new bull market. As well, the index has risen well above its 50-day moving average, once seen as a point of resistance. Meanwhile, the technology-heavy Nasdaq composite index surged 3.8 per cent, putting it up for the year by 0.6 per cent.


The latest moves came as investors grew increasingly confident that the U.S. economy is showing tentative signs of bottoming out, despite yet another nasty report on weekly jobless claims.


On Thursday, better-than-expected quarterly results from Best Buy Co. Inc. added to the impression that consumer spending isn't dead. As well, a government bond auction went according to plan, easing concerns that arose on Wednesday when bonds were sold at higher-than-expected yields, suggesting that the market's appetite for government debt was waning.


The rally was widespread: 28 of the 30 stocks in the Dow rose, as did 87 per cent of the stocks in the S&P 500.


Bank of America Corp. and Citigroup Inc., which had enjoyed outsized gains in much of the recent trading activity, were left on the sidelines on Thursday, falling 1.6 per cent and 4.8 per cent, respectively.


Still, many of the big movers appeared to signify more confidence in companies that stand to benefit from an improving economy. General Motors Corp. rose 14.1 per cent, American Express Co. rose 7.2 per cent, Hewlett-Packard Co. rose 7.1 per cent and Caterpillar Inc. rose 6.5 per cent.


The S&P/TSX composite index closed at 8995.50, up 198.06 points, or 2.3 per cent - putting the benchmark index up for the year, by about 0.1 per cent, after being under water since January. Financials did okay, with Canadian Imperial Bank of Commerce up 1.2 per cent and Toronto-Dominion Bank up 0.8 per cent.


However, the real stars of the day were companies that tend to be more economically cyclical. Potash Corp. of Saskatchewan Inc. led the way, rising 7.3 per cent. Canadian National Railway Co. rose 7 per cent, Research In Motion Ltd. rose 5.9 per cent and Suncor Energy Inc. rose 5.2 per cent.

Copyright 2001 The Globe and Mail