Stocks vaulted higher for a second straight session yesterday as investors welcomed the Treasury Department's move to put pressure on the...
NEW YORK — Stocks vaulted higher for a second straight session yesterday as investors welcomed the Treasury Department’s move to put pressure on the Chinese currency system and, perhaps, eventually reduce the U.S. trade deficit.
The Dow Jones industrial average rose 79.59 to 10,331.88, after rising 112.17 on Monday.
Microsoft, one of the 30 Dow stocks, slipped 3 cents to close at $25.46 a share. Boeing, also a Dow stock, gained 50 cents to $60.91.
Broader indicators also advanced. The Nasdaq composite index gained 9.72 to 2,004.15, its best close since April 12. And the Standard & Poor’s 500 index was up 8.11 at 1,173.80.
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Investors reacted decisively after the Bush administration declared yesterday afternoon that China may be using its monetary policies to unfairly affect trade. The Dow jumped 70 points higher in just 23 minutes, finishing with a two-day gain of 191, and the Nasdaq composite index climbed past the 2,000 mark for the first time in more than a month.
The market began the day lower after the Labor Department’s Producer Price Index showed higher-than-expected increases in wholesale prices. With the counterpart Consumer Price Index due before today’s session, analysts warned that Wall Street’s late rally could be short-lived.
“It’s encouraging to see these kind of gains two days in a row, and I guess I’m cautiously optimistic,” said Neil Massa, an equity trader at John Hancock Funds. “But all this can be erased [today] with one number.”
China’s yuan currency is pegged to the dollar in international trading, which has made China far more competitive than the U.S. due to its lower labor and materials costs. While not outright accusing China of currency manipulation, the Treasury Department said it may do so in the future unless the Chinese government switches to a flexible exchange system.
The Treasury Department’s announcement reversed a modestly down session on Wall Street. Investors’ inflation fears were renewed after the Labor Department’s Producer Price Index, which measures wholesale prices, rose 0.6 percent in May, more than the 0.4 percent economists expected. With volatile energy and food costs removed, so-called core PPI rose 0.3 percent, compared with the 0.2 percent expected on Wall Street.
Analysts were encouraged that investors reacted without the usual skittishness that marked trading over the past month.
“Considering the [PPI] numbers [yesterday], the market is taking it pretty well,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. “It gives us some certainty with the Federal Reserve, since you know the Fed will continue headlong in raising rates.”