US stocks ended higher Thursday, taking the Dow Jones industrial average to a record closing high, as banks and other financial issues gained following a decline in bond yields.
"The market had been overreacting to interest rates concerns," said Arthur Hogan, chief market analyst at Jefferies & Co. "It is really not a big surprise that it has rallied back."
Based on early and unofficial data, the Dow Jones industrial average closed up 31.33 points, or 0.27 percent, at a record closing high of 11,582.43. It was led by gains in financial services firms such as J.P. Morgan & Co., up 3 3/16 at 122 13/16, and American Express (AMEX), which gained 13/16 to 156.
Software maker Microsoft (MSFT), which called a news conference for 4:30 p.m. Eastern time declined to disclose the subject in advance, climbed 2 to 107 13/16.
The technology-laced Nasdaq Composite Index ended with a gain of 106.91 points, or 2.78 percent, to 3,956.93.
Oil and pharmaceutical stocks were also strong while airlines, computer software companies, and semiconductor equipment makers slid.
The broader Standard & Poor's 500 ended up 17.43 points, or 1.22 percent, at 1,449.68.
Stoking the gains was the improving bond market.
The US Treasury 30-year bond rose 24/32, pushing the yield down to 6.65 percent. The yield had closed at 6.72 percent on Wednesday, its highest level since July 1997, on fears the Federal Reserve will enact a series of interest rate hikes to keep inflation at bay in 2000.
Helping the bond market was news the US Treasury plans to buy back US$30 billion in debt, which would pull some supply out of the fixed income market.
News on the inflation front was mixed on Thursday with prices at the wholesale level for December matching expectations but retail prices for the same month showing Americans spent more than was anticipated.
"These numbers fit into the scenario that keeps the Fed at 25 basis points at its next meeting. Inflation at the wholesale level is in line," said Alan Ackerman, the senior vice president and market strategist for Fahnestock & Co.
In corporate news, Warner-Lambert (WLA) said its board authorized talks with Pfizer (PFE). In doing so, it jeopardizes its $53.8 billion merger plans with American Home Products (AHP).
Pfizer was up 1 13/16 at 36 7/8 while Warner-Lambert gained 5 3/16 to 92 and AHP was up 7/16 at 42 5/8.
UAL (UAL), the parent of United Airlines, issued a profit warning and saw its stock drop 9 3/4 to 65.
