Wall Street finished the week sharply higher, gaining strongly after a Federal Reserve policy meeting this week and bringing to a close a quarter that mauled technology stocks and small-caps but left large-caps barely changed.
Stocks soared immediately after the Federal Open Market Committee’s decision to raise interest rates by 25 basis points on Thursday.
The committee’s statement said that economic growth was moderating and that inflation expectations were “contained”, but did not make any reference to any immediate need for further tightening. The resulting rally gave the Dow Jones Industrial Average its best day since April last year, and the S&P 500 its best day since October 2003.
At the close on Friday, the S&P 500 was down 0.2 per cent, or 2.66 points, at 1,270.21, and up 2.1 per cent for the week. The Nasdaq was down 0.1 per cent, or 2.29 points, leaving it 2.4 per cent higher for the week at 2,172.09. The Dow Jones Industrial Average was down 0.4 per cent, or 40.58 points at 11,150.22, leaving it 1.5 per cent higher for the week.
Both the Nasdaq Composite and the Russell 2000 index of smaller companies had bad quarters, dropping 7.2 per cent and 6.4 respectively. The S&P 500 did not do as badly but still shed 1.9 per cent. The Dow was the only major index to keep its head above water in the quarter, adding 0.4 per cent since the end of March.
“We did very well for the week but not so good for the quarter. The fear of higher interest rates cut short the first-quarter rally,” said Peter Cardillo, chief market analyst at SW Bach.
Since the beginning of the year, the Russell 2000 has gained 6.4 per cent, while the Dow has risen 4 per cent. The Dow briefly overtook the Russell’s year-to-date performance last week, only to fall behind it again this week. The S&P 500 has gained a more modest 1.8 per cent since the beginning of January, leaving the Nasdaq the biggest laggard. It has dropped 1.5 per cent since the start of the year.
“The tech sector did horribly,” said Mr Cardillo.
This week, medical device makers were pushed lower by double trouble.
Boston Scientific slumped 7.8 per cent over the week to $16.84 after it recalled nearly 23,000 pacemakers and defibrillators that it said might malfunction because of an electrical flaw. And a regulatory probe hit shares in Biomet and Zimmer Holdings, which both confirmed they had received subpoenas from the Department of Justice over an antitrust investigation. Biomet dropped 10.5 per cent to $31.29, while Zimmer fell 10 per cent to $56.72.
EMC Corp, the maker of data storage systems, lost 4.9 per cent to $10.97 as investors feared it had offered too much to take over RSA Security, an IT security company.
Micron Technology, the maker of flash memory products, fell 8.3 per cent to $15.06 in spite of reporting a third-quarter swing to profit. Analysts were disappointed with the company’s revenue for the quarter.
J Crew made its debut on Wednesday, with shares priced at $20. The stock rose 27.8 per cent in the first day and finished the week up 37.3 per cent at $27.45.
Crude’s rise to an eight-week high helped the American Stock Exchange Oil Index to rise 6.4 per cent. ExxonMobil climbed 5.6 per cent to $61.35, while Hess Corporation gained 14.6 per cent to $52.85.
Intel jumped 5.6 per cent to $19.00 on a stream of good news for the long embattled chipmaker. On Monday, the company introduced a new microprocessor for computer servers and later announced the sale of a unit that makes chips for hand-held devices to Marvell Technology.
General Motors stayed in the headlines, experiencing heavy volatility. The shares plunged on Tuesday after it said sales for 2006 would come in below 2005 levels.
The stock then rose again on Friday after billionaire investor Kirk Kerkorian said Renault and Nissan would be interested in buying a stake in GM. The stock ended up 10.5 per cent at $29.79 for the week, its highest level since October.
Apple Computer continued its slide, losing 2.7 per cent to $57.27 after it said an internal investigation had uncovered irregularities in its stock options programme.
Computer Sciences fell 11.8 per cent to $48.56 after it decided to pursue a $2bn share buyback programme rather than put itself up for sale.