Labor Data Encourage Investors; S& P 500 Hits Six-Year High
Wednesday, December 6, 2006
NEW YORK, Dec. 5 -- Wall Street rallied for a second straight session Tuesday after easing wage pressures and strong service sector activity raised prospects that the economy could cool gradually and leave room for the Federal Reserve to lower interest rates next year.
The Dow Jones industrial average rose 47.75, or 0.39 percent, to 12,331.60. A 2.5 percent increase from Coca-Cola and a 2.3 percent rise from Disney helped the blue-chip average. The broader Standard & Poor's 500-stock index gained 5.64, or 0.40 percent, to 1414.76, hitting a six-year high of 1415.27. The Nasdaq composite index was up 3.99, or 0.16 percent, at 2452.38.
Investors were cheered by Labor Department figures showing that wages and benefits increased at a much slower pace in the third quarter than had been estimated. Recent concerns about inflation had eroded some hopes that the Federal Reserve would start lowering interest rates next year. The central bank has said inflation remains its primary concern.
The Labor Department report found costs of wages and benefits per unit of output increased at the annual rate of 2.3 percent in the third quarter, down from the 3.8 percent rate the agency reported a month ago.
Also, growth in worker productivity slowed to an annual rate of 0.2 percent, though the increase topped an earlier estimate that had productivity as unchanged.
Meanwhile, the Institute for Supply Management, a trade group, said activity in the country's services sector rose at a faster rate in November, giving a further boost to investor sentiment. The reading of 58.9 was above the 55.5 that had been expected and October's 57.1.
Toll Brothers advanced 96 cents, to $32.87.
Coca-Cola rose $1.17, to $48.
Disney rose 76 cents, to $34.20, a five-year high after bullish comments by investors.
Direct General surged $3.99, to $20.50, after the insurance holding company agreed to be acquired by a private equity group.
Kroger rose $1.16, to $23.49, after posting a 16 percent increase in third-quarter profit.
Cooper Tire & Rubber rose $1.12, to $14.46, after a Deutsche Bank analyst upgraded the stock.