NEW YORK: Stocks edged higher on Friday, led by dividend-paying stocks after Congress approved a US$350bil tax-cut package, but most bonds fell in thin trading before the long Memorial Day holiday weekend.
The euro rose above US$1.1800, the highest price since its January 1999 launch.
Gasoline prices rose to a five-week high on expectations of strong demand this weekend, which marks the start of the summer vacation driving season.
“Word from Congress that they reached a compromise on the tax bill is a positive,” said Phil Orlando, senior portfolio manager at Federated Investors, which oversees US200bil.
The legislation lowers the top tax rate on dividends and accelerates scheduled income tax cuts. It also gives tax breaks for businesses to spur investment in new equipment.
“The two key elements will stimulate consumer spending and capital spending, and that’s helping stocks today. The dividend issue, which is what people are focusing on, is the third-most important factor,” Orlando said.
The Dow Jones industrial average finished up 7.36 points, or 0.09%, at 8,601.38. The broader Standard & Poor’s 500 Index edged up 1.35 points, or 0.14%, to 933.22. The technology-laced Nasdaq Composite Index added 2.54 points, or 0.17%, to 1,510.09.
For the week, the S&P 500 fell 1.17% and the Nasdaq lost 1.85%, snapping a five-week string of gains. The Dow ended the week down 0.89%.
Trading was moderate, with many market participants leaving early for the three-day holiday weekend. US financial markets will be closed on Monday for Memorial Day.
Advancers outnumbered decliners by 2 to 1 on the New York Stock Exchange and by 18 to 13 on the Nasdaq. Roughly 1.20 billion shares changed hands on the Big Board, and about 1.44 billion shares traded on the Nasdaq.
Shares in sectors with high-paying dividends, like tobacco and utilities, rallied on the tax-cut news, “but it's spilling over into everything,” said Michael O'Hare, head of block trading at Lehman Brothers. “There's a more positive tone to the market.”
Growing confidence that the economy will improve has pushed the S&P 500 up 16.5% since mid-March.
Utilities were the day's top performers. Shares of Entergy Corp and Duke Energy Corp both jumped more than 4%, pushing the S&P Utilities index up 3.88%. Philip Morris parent and Dow component Altria Group Inc, which also pays a high dividend, rose 3.07% or US$1.26 to US$42.31.
Boeing Co shares rallied on news the Bush administration approved a multibillion-dollar deal to lease modified Boeing transport aircraft as Air Force refueling tankers. Boeing ended up 3.06%, or 89 cents, to US$29.99.
Microsoft Corp edged up 6 cents to US$24.22 even though Chief Executive Officer Steve Ballmer said he was selling some of his Microsoft stock to diversify his financial assets.
Among decliners, Gap Inc shares fell a day after the biggest US specialty apparel retailer reported its third straight quarter of earnings growth. But analysts said Gap faces much tougher sales and earnings comparisons in the future. Gap fell 4.07%, or 70 cents, to US$16.50.
At the early 2pm (1800 GMT) bond market close, the 10-year US Treasury note slipped 5/32 to 102-14/32, while its yield rose to 3.34% from 3.32% at Thursday’s close.
The 30-year bond, however, gained 3/32 to 118-1/32, while its yield slipped to 4.26% from 4.30% on Thursday.
The two-year note dipped 1/32 to 100-17/13, with its yield steady at 1.35%.
The euro pierced its launch rate of US$1.1747 overnight, putting the single currency within reach of its lifetime high near US$1.1886. It settled at US$1.1837, up from US$1.1694 late Thursday.
The dollar fell to 116.86 Japanese yen from 117.14 yen at Thursday’s close.
On the New York Mercantile Exchange, June gasoline jumped 1.33 cents to end at 90.65 cents a gallon. July crude oil rose 31 cents to settle at US$29.16 a barrel.
Overseas, London’s FTSE Eurotop 300 index of pan-European blue chips ended down 0.81% at 802.31 points.
In Tokyo, the Nikkei average closed up 1.65% at 8,184.76, its highest closing level since May 14, after rising as high as 8,219.87. – Reuters