After fluctuating much of the day on mixed economic data, stocks shot higher right before the close. Analysts attributed the surge to buying by short sellers who had bet that stocks would fall and then had to rush to buy when those bets turned out to be wrong.
NEW YORK (AP) — Wall Street sealed the third month of its spring rally with a huge advance. The fourth month looks a little less certain.
Stocks shot higher right before the closing bell Friday after fluctuating on a mix of economic data. Analysts said the surge was the work of short-sellers who had bet that stocks would fall and then had to rush to buy when those bets turned out to be wrong.
A jump in commodities prices, which came on expectations that an improving economy will lift demand for raw materials, also fed the advance.
Even though Wall Street ended May with a big win, it was the shakiest month of the spring rally that started in early March with the first signs that the economy’s slide was slowing. When trading resumes Monday, investors are expected to show more of their recent skepticism about how strong the recovery will be once the recession has ended.
New worries are weighing on investors including climbing interest rates and a weaker dollar. Crude oil prices recently hit a six-month high above $66 a barrel, while the dollar on Friday sank to its lowest level in months against the euro and British pound. Some analysts say these developments are simply the consequence of a recovery in the economy and the financial markets, but others warn these trends could threaten the economy’s health in the long-term.
Another more short-term obstacle is General Motors Corp.’s expected bankruptcy filing on Monday, the automaker’s restructuring deadline. The market has been factoring in the likelihood of a GM bankruptcy for months, but investors still are unsure what the fallout might be for auto suppliers and other companies.
“Technically, the market is looking quite good,” said Peter Cardillo, chief market economist at the brokerage house Avalon Partners Inc. “Although, I suspect we’ll probably stay within this trading range for another couple of weeks.”
The Dow Jones industrial average rose 96.53, or 1.2 percent, to 8,500.33. The Standard & Poor’s 500 index gained 12.31, or 1.4 percent, to 919.14, while the Nasdaq composite index rose 22.54, or 1.3 percent, to 1,774.33.
All three indexes rose sharply for the week and, more importantly, had their third straight winning month. The Dow is up 4.1 percent for May, the S&P 500 index is up 5.3 percent, and the Nasdaq is up 3.3 percent.
Friday’s economic data prevented the market from finding a direction for much of the day. Commerce Department’s report on first-quarter gross domestic product showed the economy contracted at an annual rate of 5.7 percent, a bit more than analysts’ forecasts. Also, personal spending was revised lower. But the drop in GDP was smaller than the 6.1 percent estimated last month, and the report showed corporate profits rising.
The report “points to recovery,” Cardillo said. “And what you have here is a market that continues to look for recovery.”
The Chicago-area purchasing executives monthly report of Midwest manufacturing activity showed a bigger decrease in May than in April. Analysts had anticipated a smaller contraction. The report is viewed as a precursor to the Institute for Supply Management’s national manufacturing index, due Monday.
But helping counteract that disappointing report was the University of Michigan’s index of consumer sentiment, which showed a larger-than-expected increase in May. Another report earlier in the week suggested an upswing in consumer confidence, too.
Government bonds rose, pushing down yields. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.46 percent from 3.62 percent late Thursday.
The 10-year yield hit a six-month high of 3.75 percent on Wednesday. Spiking interest rates earlier this week stoked concerns about Americans’ ability to borrow and refinance mortgages.
Oil prices have been jumping to six-month highs as the dollar tumbles. Light, sweet crude rose $1.23 to settle at $66.31 a barrel on the New York Mercantile Exchange. Gold and silver prices rose as well.
Rising commodities prices have driven some of the best performers in the stock market over the past month: Metal and coal producers, miners and pipelines.
Technology stocks have also picked up in recent weeks.
The weakening dollar is also drawing more investors, like Robert Pavlik of Banyan Partners LLC, to the stocks of multinational companies. Those companies can export more and earn higher overseas revenues when the dollar is down, he said.
The worst performers in May were companies tied to the housing market and discretionary spending, such as construction companies, home improvement retailers, furniture makers and consumer electronics sellers. And financial stocks, while holding up, have not been leading the market higher as they were in March and April.
The Russell 2000 index of smaller companies rose 9.37, or 1.9 percent, to 501.58.
Advancing stocks outnumbered declining stocks by more than 3 to 1 on the New York Stock Exchange, where volume was 1.86 billion shares. Volumes were lighter than on Thursday.
Overseas, Japan’s Nikkei stock average rose 0.8 percent. Britain’s FTSE 100 rose 0.7 percent, Germany’s DAX index rose 0.2 percent, and France’s CAC-40 rose 0.4 percent.