Stocks Advance on Economic Stimulus Hopes
NEW YORK (Reuters) - Stocks rose in early morning trading on Monday as investors bet President Bush's economic stimulus package, expected on Tuesday, will boost corporate profits by cutting costs for corporations.
Bush will likely propose cutting taxes on dividends and speeding up tax breaks for the nation's top earners. Details of the president's plan helped offset worries about the upcoming quarterly earnings reporting season and fears about a possible U.S.-led war with Iraq, traders said.
"Much of this negative news is being offset by hints being released about President Bush's stimulus package," said Harry Michas, stock index futures trader at manmarketmonitor.com.
The Dow Jones industrial average (26099400) was up 59.03 points, or 0.69 percent, at 8,660.72. The broader Standard & Poor's 500 Index (SPX) rose 8.73 points, or 0.96 percent, to 917.32. The technology-laced Nasdaq Composite Index (COMP) was up 18.02 points, or 1.3 percent, at 1,405.10.
Companies are expected to start posting quarterly results over the next few weeks and worries linger about what the reports may bring.
In addition, growing fears about a war in Iraq are expected to keep a lid on stocks. Iraqi President Saddam Hussein on Monday dismissed U.S. threats to disarm Iraq by force and said his country is ready for war.
"The market still has a lot of concerns about the Middle East," said John Person, head financial analyst with Infinity Brokerage Services. "Saddam Hussein's speech was proactive for war rather than cooperative peaceful means."
FEDEX GAINS
Stocks on the move included the world's biggest air-express firm, FedEx Corp <FDX.N, which rose $1.85, or more than 3 percent, to $57.35 after Credit Suisse First Boston raised its rating on the company to "outperform" from "neutral," saying it has a long-term strategy that will likely help improve profits.
AT&T Corp. (T) fell 6 cents to $27.60 after the largest U.S. long-distance telephone company said it will take a $240 million restructuring charge as it cuts about 3,500 jobs amid shrinking revenue and stiff competition.
Online hotel reservations company Hotels.com (ROOM) tumbled $15.20, or 25 percent, to $43.84 after saying it expects to post lower-than-projected revenue and earnings in the fourth quarter, due to a slump in worldwide hotel occupancy and higher expenses.
The latest economic data showed a decline in the U.S. services sector.
The Institute for Supply Management's index of non-manufacturing data slipped to 54.7 in December, lower than the 55.9 expected by economists, and down from the 57.4 in November.
Stocks pared gains immediately after the report, then pushed higher.
ECONOMIC DATA EXPECTED
Stocks rose last week, gaining some ground in the first two days of the new year. For the week, the Dow average had gained 3.6 percent, the S&P 500 gained 3.8 percent, and the Nasdaq advanced 2.9 percent.
Traders say the market's direction in coming days will rely heavily on economic data.
"Whether the market can continue higher depends on major economic and fundamental events this week, namely President Bush's tax plan announcement tomorrow and the monthly unemployment report on Friday," said Person. "Virtually every day this week there will be an economic report that will be closely watched." (Additional reporting by Doris Frankel in Chicago)
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