Updated from 4:16 p.m. EDT
Blue chips and tech shares used a broad-based rally Wednesday to close with impressive gains, and the
Dow Jones Industrial Average
finished at a record high for the second straight session.
After a slow open, the Dow overcame early selling pressure on
and surged 123.27 points, or 1.05%, to 11,850.61. The
jumped 16.11 points, or 1.21%, to 1350.22, and the
surged 47.30 points, or 2.11%, to 2290.95.
Helping the bulls was a weak report on the services sector that bolstered the case for a market-friendly
took their turn as the Dow's leaders, rising 2.1% and 2.7%, respectively. Wal-Mart even turned things around and rose 0.2%.
The Nasdaq, meanwhile, benefited from a 9.8% advance in
Volume and breadth improved from Tuesday's levels. About 2.99 billion shares changed hands on the
New York Stock Exchange
. Advancers beat decliners by a 13-to-4 margin. Volume on the Nasdaq was roughly 2.21 billion shares, with winners beating losers 7 to 3.
The industrials strengthened after the Institute for Supply Management's services index dropped to 52.9 in September from 57.0 the previous month. The reading was below consensus forecasts and was the lowest figure since April 2003.
"Stocks seem to taking pleasure in the fact that the economy is slowing down, which I don't understand," said Paul Nolte, director of investments with Hinsdale Associates. "Future inflation doesn't seem to be an issue, but the market has been celebrating poor economic news lately."
To view Gregg Greenberg's video take on today's market, click here
Jay Suskind, head of institutional equity trading with Ryan Beck & Co., shares the same concerns about of the market's recent advance. "I'm surprised we've climbed this high, even with drifting crude prices," he said. "The market is acting as if the Fed is out of the picture, but that may be premature. The economy could still slow too fast to give us a hard landing."
Wall Street's gains were boosted by a comment from Fed Chairman Ben Bernanke that a "substantial correction" in the housing market might weigh on the economy. He made the statement in a question-and-answer session following a speech at the Washington Economic Club that focused on savings and social security.
Recently, Fed officials have indicated that they believe the economy is moderating, but not enough to start thinking about cutting rates. The weak ISM services number, along with Bernanke's strong language about the housing market, likely suggest to traders that the Fed will remain on the sidelines, if not become more dovish.
At the last two meetings of policymakers, rates have been left unchanged at 5.25%. Before that, the Fed lifted its fed funds target at 17 straight meetings in a bid to keep the economy from overheating.
On Tuesday, the industrials finished at 11,727.34, up 56.99 points, or 0.49% on the day, eclipsing the prior best-ever close of 11,722.98 on Jan. 14, 2000. The uplift was spark by a plunge in oil futures and gains of 1.9% or more in
and Wal-Mart. At the end of the day, 23 of the 30 components were in positive territory.
Marc Pado, U.S. market strategist with Cantor Fitzgerald, believes it's highly unlikely the record on the Dow "has much significance beyond the headlines that might induce some retail investment money back into the market."
Crude, which has sunk this week, moved higher after an initial retreat following the weekly U.S. inventory report. Crude finished trading up 73 cents to close at $59.41 a barrel. The Energy Department's report showed an unexpected build in oil stocks of 3.3 million barrels last week. Analysts had been anticipating a decline, which would have supported prices.
Gasoline inventories rose by 1.2 million barrels, and distillate inventories increased by 200,000 barrels.
Banc of America, following Lehman Brothers and Merrill Lynch a day before, cut its ratings on several energy stocks.
were just a few of the names the firm hit with downgrades.
had its own problems, saying after the close of trading that its third-quarter earnings will fall short of analysts' targets because of a sharp drop in gasoline margins. Even so, Valero climbed by $1.93, or 4%, to $50.10.
Staying on the research side, Bear Stearns upgraded
to peer-perform from underperform, but lowered its rating on
to peer-perform from outperform.
Shares of GM fell, however, after
The Wall Street Journal
reported that alliance talks between the automaker and Nissan-Renault, have ended without a deal. GM slid 0.3% to $33.32. Ford, which has said it may seek its own deal with Nissan-Renault should the GM talks stumble, ended higher by 4% to $8.56.
Wal-Mart, a day removed from providing support for the Dow's record run, cut its September same-store sales growth estimate to 1.3%. Over the weekend, it had predicted a 1.8% advance, a number that was already below the midpoint of its earlier projection. Still, shares of Wal-Mart reversed early weakness and managed to tack on 9 cents to $49.55.
XM Satellite Radio
said it added more than 285,000 subscribers during the third quarter, boosting its total to 7.18 million. XM said the results matched expectations, meaning it should end the year with 7.7 million to 8.2 million subscribers.
Shares of XM fell, however, after an independent director resigned. The resignation put the satellite radio company out of compliance with Nasdaq listing rules. XM slid by 62 cents, or 4.9%, to $11.96.
Sirius Satellite Radio
said it added 441,000 subscribers during the quarter, bringing its total base to 5.12 million. Sirius expects to finish the year with 6.3 million customers. Sirius lost 13 cents, or 3.2%, to finish at $3.94.
was on the rise after its subsidiary America Online introduced its software program OpenRide. The program allows users to utilize AOL's Internet, email and instant messaging all within panels on the same computer screen. Time Warner gained 23 cents, or 1.3%, to $18.57.
tumbled 11.3% after a federal court overturned a previous ruling, allowing
to continue producing and selling its own digital video recorders. TiVo was off 85 cents to close at $6.67.
surged following word that an unnamed pharmaceutical firm made an offer of $36 a share for the company, only to be rebuffed by new director and 14%-stockholder Carl Icahn. ImClone, the maker of the cancer drug Erbitux, still finished up $2.16, or 8%, to $29.33.
Also on the economic docket, the Commerce Department said that U.S. factory orders were flat in August after a 1% decline in July. Economists expected orders to fall by 0.2%.
Following the day's economic data, Treasuries moved higher. The benchmark 10-year note ended up 13/32 in price to yield 4.56%. The dollar was little changed against the euro and the Japanese yen.
Precious precious metals continued their recent decline. Gold fell $14.80 to $566.70 an ounce, and silver slipped 25 cents to $10.79 an ounce.
Overseas, Europe's equities moved to the upside. London's FTSE 100 added 0.5% to 5966, and Frankfurt's Xetra DAX was higher by 0.9% to 6046. Asia's shares were mixed, with Tokyo's Nikkei ending down 1% to 16,082 and Hong Kong's Hang Seng up 0.1% to 17,629.