Stocks climb after retail sales, Alcoa earnings

NEW YORK — The stock market resumed its rally after getting encouraging readings on two of the best gauges of the economy’s health: consumer spending and corporate profits.

The Dow Jones industrial average rose 61 points Thursday after falling modestly the day before. The gains added to the market’s already steep climb for the week. Improving signals about the economy pushed the Dow up 244 points Monday and Tuesday, its best back-to-back advance since July.

Traders pounced on news that retailers last month had their first sales gains in more than a year. A closely watched gauge of sales at major retailers rose 0.1 percent for September. While still tepid, it was the first monthly rise in the International Council of Shopping Centers-Goldman Sachs tally since July 2008.

The growing hopes for consumer spending, which is crucial for an economic recovery, followed late Wednesday’s good news from Alcoa Inc. The company surprised investors with its first profit in nine months, which the aluminum company attributed to cost-cutting and rising sales to automakers.

Alcoa is one of the first major companies to post its results. Its report and upbeat forecast for aluminum demand had many traders betting that companies’ results for the July-September quarter, to be released in the coming weeks, will be better than expected.

“Alcoa set the tone and backed it up,” Michael Feser, president of Zecco Trading said.

A slumping dollar helped pump up commodities prices, which gave a lift to energy and materials stocks.

Meanwhile, a better reading on the job market also fed investors’ optimism. The Labor Department reported that new claims for jobless benefits fell to 521,000 last week from 554,000 the previous week. Claims came to the lowest level since early January.

The Dow rose 61.29, or 0.6 percent, to 9,786.87. The market ended off its best levels after demand at a government auction of 30-year bonds fell short of expectations. The Dow was up 111 points at its high.

The Standard & Poor’s 500 index rose 7.90, or 0.8 percent, to 1,065.48, while the Nasdaq composite index rose 13.60, or 0.6 percent, to 2,123.93.

About three stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 5.2 billion shares, compared with 5.1 billion Wednesday.

Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.25 percent from 3.19 percent late Wednesday.

The week’s advance has put the market’s seven-month rally back on track, sending the major indexes toward their best weekly gain since early July after two down weeks. Investors had become discouraged in recent weeks by a stream of disappointing economic data, as improvements in areas like manufacturing slowed.

The market got a boost this week from signs of growth in service industries and a surprise interest rate hike in Australia that was seen as a vote of confidence in the global economy.

“The way we will perform is two steps forward, one step back,” said Michael Strauss, chief economist at Commonfund in Wilton, Conn. “But at the end of the day we are moving to higher prices.”

Still, much depends on how the rest of earnings season goes. Investors question whether the market’s surge can continue if earnings results don’t back up the market’s perception that the economy is improving. The S&P 500 index is up 57.5 percent since hitting a 12-year low in March.

Robert MacIntosh, chief economist at Eaton Vance Management, said Alcoa’s numbers were good but that it’s still early in earnings seasons. Financial companies, one potential trouble spot, report next week.

“I wouldn’t say we’re in the clear,” he said.

Companies mostly beat modest earnings expectations during the second quarter because of cost-cutting measures, and investors now want to see actual revenue growth as a driver of profits.

Alcoa rose 15 cents to $14.35.

Commodities rallied as the dollar fell further against other currencies.

Gold hit another new record, rising as high as $1,062.70 an ounce. Oil prices rallied $2.12 to settle at $71.69 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies rose 5.67, or 0.9 percent, to 607.75.

Overseas, Britain’s FTSE 100 gained 0.9 percent, while Germany’s DAX index and France’s CAC-40 each jumped 1.3 percent. Japan’s Nikkei stock average rose 0.3 percent.