Overnight Wall St Rally

Submitted by Share Trading on 15 December, 2005 - 09:15

Dow Jones Up - Tech Stocks let down by Apple, Boeing Soars on News of $US14.4 billion Qantas Deal: US stocks traded mostly higher overnight, with the main broad-market index touching a four-and-a-half-year high as Wall Street extended a rally on hopes that the recent cycle of interest rate hikes has ended.

The Dow Jones Industrial Average advanced 0.56 per cent, or 61.15 points, to 10,884.87, but the tech-heavy Nasdaq composite fell 0.10 per cent, or 2.34 points, to 2,262.66 at the closing bell.

The broad-market Standard and Poor's 500 index gained 0.43 per cent, or 5.51 points, to a preliminary close of 1,272.94, which would be the best closing since June 2001.

The tech sector was hurt by broker downgrades of Apple Computer. But the overall market was keeping some of the momentum from Tuesday's rally after the Federal Reserve hinted that its quarter-point rate hike might be among the last in the currency cycle.

Honeywell International, in contrast, pushed the Dow higher after its 2006 earnings guidance was in line with Wall Street's expectations.

"We're seeing a bit of follow-through from the Fed decision yesterday," said Michael Malone, analyst at SG Cowen. "The market, of late, has been consolidating gains going back to the middle of October, and it has been waiting for a catalyst to make the next move up to year-end."

Tuesday's Federal Open Markets Committee meeting "was a watershed in the sense that it was the first time the Fed left the window open for a pause in this 18-month old tightening cycle," said David Rosenberg, Merrill Lynch's North American Economist, in a research note on Wednesday.

Stocks got some early support from crude oil futures, which fell slightly after surprisingly strong petroleum inventory numbers from the US Department of Energy.

But Wall Street lately has had trouble keeping its early advances, and the day's news was decidedly mixed. The US trade deficit unexpectedly rose to an all-time high in October as oil shipments soared and the United States set deficit records with China, Europe, Canada and Mexico. So far this year, the trade deficit is running at an annual rate of $US718 billion ($950 billion), far surpassing last year's $US617.6 billion imbalance.

Diversified manufacturer Honeywell International jumped after it gave 2006 earnings guidance of $US2.35 to $US2.50 a share, up 20 per cent to 30 per cent. The company also affirmed its earnings and sales targets for 2005.

Stock in Dow component Boeing hit an all-time high after Australia's flagship carrier Qantas said it could order up to 115 new Boeing 787 "Dreamliners" in a deal that may net Boeing at least $US14.4 billion. The twin aisle twin engine jets are built for long-distance flights.

Tech stocks slipped after both Banc of America and Bear Stearns downgraded Apple Computer, with Banc of America saying the 50 per cent run-up in the stock's price over the past six weeks has made it hard to justify more buying.