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NEW YORK — Wall Street extended its advance Thursday amid a burst of enthusiasm about the economy that gave the Standard & Poor’s 500 index its first close above 1,500 since September 2000.
The S&P 500, the index most closely watched by market professionals made its first foray past 1,500 shortly after trading began and rose as high as 1,503.34 just over a week after the Dow Jones industrial average passed 13,000 for the first time. The index closed at 1,502.39, up 6.47, or 0.43%, and is now within striking distance of its closing high of 1,527.46, set March 24, 2000, just as the dot-com bubble began to burst and Wall Street began a three-year-long decline.
The Dow, meanwhile, had its third straight record high close.
Stocks have soared in recent weeks as first-quarter earnings beat reduced expectations, and upbeat economic news added to the gains. With the Dow having piled on more than 700 points in April alone, there are concerns that investors may be getting a little too enthusiastic given the uncertainty in the housing market and other sectors of the economy.
On Thursday, the good news was about inflation: The Labor Department said wages, as measured by unit labor costs, rose at a tepid 0.6% rate in the first quarter. The news fed Wall Street’s hopes for an interest rate cut later this year.
Perhaps giving the S&P 500 its final push, the Institute for Supply Management said its index of non-manufacturing business rose to 56.0 in April from 52.4.
“You’re seeing some vertigo out there, the fear we’re getting ahead of ourselves,” said Arthur Hogan, chief market analyst at Jefferies & Co. “There’s going to be natural trepidation at new levels, but you rationalize these levels in knowing that we haven’t overextended ourselves like we were in 1999.”
According to preliminary calculations, the Dow Jones rose 29.50, or 0.22%, to 13,241.38. The blue chip index has now hit 18 record closes since the start of the year and 40 since the beginning of October. The Dow’s climb in 22 of the past 25 sessions marks the blue chip average’s longest advance since 1955.
The Nasdaq composite index rose 7.62, or 0.30%, to 2,565.46.
The S&P’s achievement marked another milestone in Wall Street’s recovery from a prolonged slump at the start of the decade. The slide began with the end of the dot-com boom, then accelerated as the economy fell into recession and after the Sept. 11, 2001, terror attacks. Corporate scandals including the collapse of Enron Corp. and Worldcom took a further toll on the market.
The S&P 500 fell to a low of 776.76 on Oct. 9, 2002, before starting its recovery. But while it and the Dow have made the long trip back, the Nasdaq, despite its own signs of vigor, is not expected to reach its closing high of 5,048.62, set March 24, 2000, anytime soon. The tech-dominated index was arguably overinflated by the rush to join the Internet boom.
“People are watching the momentum moving the market higher and in some cases they’re participating, maybe grudgingly, but they’re missing out otherwise,” said Bill Schultz, chief investment officer, at McQueen, Ball & Associates. “There are a lot of people that are looking for a dip to buy and we haven’t seen it. At some point you have to say, ‘The dip isn’t coming but I want to participate.”‘
Thursday’s advance came as investors grew optimistic about inflation. Although Wall Street has surged higher over the past month, concerns about inflation, including that of wages, still dog the market as investors try to determine whether an inflation-wary Federal Reserve will become comfortable enough later in the year to lower short-term interest rates. The Fed has left rates unchanged at recent meetings, in part because of concerns about inflation.
Other economic data helped shape investor sentiment Thursday. The government reported that the number of Americans seeking unemployment benefits fell by 21,000 last week to 305,000, the lowest level since mid-January. The decline was broader than expected and was the third straight decrease in weekly claims.
The economic figures came a day ahead of other Labor Department reports on nonfarm payrolls and unemployment.
Besides economic data, the parade of earnings reports continued Thursday with General Motors Corp. turning in lower first-quarter earnings. GM’s profit fell 90% from a year earlier, which benefited from a gain. The company also suffered losses in the residential mortgage business of GMAC Financial Services. GM, one of the 30 stocks that makes up the Dow industrials, fell $1.75, or 5.4%, to $30.69.
Bonds fell Thursday following the economic data; the yield on the benchmark 10-year Treasury note rose to 4.67% from 4.65% late Thursday.
Light, sweet crude fell 49 cents to $63.19 per barrel on the New York Mercantile Exchange.
The dollar was mixed against other major currencies, while gold prices fell.
Advancing issues outnumbered decliners 3 to 2 on the New York Stock Exchange, where volume came to 1.59 billion shares, up from 1.50 billion on Wednesday.
The Russell 2000 index of smaller companies rose 0.41, or 0.05%, to 828.87.
Overseas, markets in Japan were closed for a holiday. At the close, Britain’s FTSE 100 rose 0.82%, Germany’s DAX index gained 0.28%, and France’s CAC-40 rose 0.24%.
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