Homebuilding and Insurance Stocks Rise in Response to Positive News
After slight losses the previous two days Wall Street stocks, especially insurance, technology and homebuilding companies, rose thanks in part to positive news in recent days for those industries. The gains were somewhat modest as investors brace for expected low first quarter profits and a bleak assessment of the economy from the Federal Reserve. The concerns contributed to a drop in the Dow Jones of close to 3% before Wednesday’s slight increase. The Dow finished up almost 50 points or a little over half a percent to close at 7,837. The S & P 500 also saw a rise, closing ten points higher at 825 , an increase of ten percentage points. The Nasdaq index rose as well, climbing almost thirty points to 1,591, a rise of nearly two percent. The losses earlier in the week followed 4 consecutive weeks of substantial gains which represented the best performance by the Dow since 1933. While investors remain skiddish over poor earnings reports, most analysts fall short of predicting the recent rally over.
Recent good news for the homebuilding and insurance industries is leading some analysts to maintain a hopeful outlook. Pulte Homes Inc. and Centex Corp. on Wednesday announced a deal valued at over $1.2 billion that will create the largest homebuilder in the country. The deal led to an increase in Centex stock of more than 19% while Pulte shares fell a little over 9%. Other homebuilders had mixed results. Insurance stocks were helped by a report in the Wall Street Journal that the government plans to provide rescue funds to the life insurance industry, which has suffered recently due to massive investment losses. The report said that an official announcement could be made within the next few days. The report caused Prudential stock to rise almost 6% and Hartford stock gained almost 15%. Technology stocks are also faring well. Juniper Networks Inc. announced expectations for quarterly earnings to meet forecasts, causing shares to jump 11.9%. Cisco Systems and Microsoft also saw moderate gains.
SEC commissioners gave investors some hope by voting 5-0 to open some proposals to public debate including a plan to curb short-selling, where investors sell borrowed shares in an attempt to cash in on falling stocks. The commissioners are looking at five proposals for a short selling plan and plan on adopting one after a 60 day period of public discussion.
News concerning various sectors of the economy was widely mixed. The Commerce Dept. reported that wholesalers lowered inventories in Feb. by more than that of any month in almost 18 years. Sales, meanwhile, were higher for the first time since last summer. Analysts see these trends as indicators that companies are getting control of their inventories. The Federal Reserve announced, after their March meeting, plans to pump over a trillion dollars into the economy in an attempt to lower insurance rates and spur consumer confidence.
In other economic news the Russell 200 index, an index of smaller companies, rose more than one percent. Across the board the NYSE saw about 2 stocks rise for every one that fell as trading was light at just over 920 million shares. Bond prices also moved upward Wednesday. The price of gold was up, and the dollar was mixed compared to other major currencies. On the NY Mercantile Exchange, light, sweet crude oil rose 15 cents. In international markets, Japan’s Nikkei fell while Britain’s UK FTSE 100, Germany’s DAX, and France’s CAC-40 all saw modest gains.