GM’s Shift Gives Dow a Boost

Wall Street ended Tuesday mixed, with a rally in General Motors shares helping to carry the Dow Jones industrials to a fresh six-year high and within reach of its best close. But Dell’s profit warning put a dent in the tech sector.

The Dow pressed toward its all-time high despite anxiety as investors awaited the Federal Reserve’s next move on interest rates. The policymakers meet today. Many on Wall Street are hoping the Fed will signal that an end to its rate tightening is near.

But analysts say the Dow is poised to break its record and could push higher. Ken Tower, chief market strategist for Charles Schwab’s CyberTrader subsidiary, said investors appeared increasingly optimistic about the market, especially after stocks held on to their sharp gains from the end of last week.

“People became much more bullish on Friday morning, and the fact they didn’t sober up over the weekend is a very positive sign for the market,” Tower said. “Of course, everything depends on the Fed. But at least for the moment, you have to look at the market in a positive light.”

Dell said its first-quarter sales and profit would miss estimates, hurt by discounting as it fought to keep pace with competitors. Meanwhile, solid April sales at McDonald’s helped the Dow advance and countered a rise in oil prices.

The Dow rose 55.23 points, or 0.5%, to 11,639.77. The index of 30 blue-chip stocks is 83 points from its all-time closing high of 11,722.98 reached Jan. 14, 2000.

Broader stock indicators finished mixed. The Standard & Poor’s 500 index added 0.48 point to 1,325.14, and the Nasdaq composite index slid 6.74 points, or 0.3%, to 2,338.25.

Advancing issues narrowly edged decliners on the New York Stock Exchange. The Russell 2,000 index of smaller companies fell 0.88 point, or 0.1%, to 780.72.

Bond yields moved higher ahead of the Fed’s meeting, with the 10-year Treasury note rising to 5.13% from 5.11% on Monday.

Gold futures soared to $699.40 an ounce, up $21.60, and the euro rose to $1.275, up from $1.27.

Crude futures marched forward amid persistent concerns about Iran’s nuclear arms program. A barrel of light crude rose 92 cents to $70.69 in New York trading.

Wall Street had little reaction to a lower-than-expected rise in wholesale inventories. The Commerce Department said inventories grew just 0.2% in March after swelling 0.9% the month before, below estimates of 0.5%.

In other market highlights:

* GM rallied $2.25, or 9.6%, to $25.80 for the biggest gain in the Dow and the S&P; 500. The automaker revised first-quarter results to say it had net income of 78 cents a share rather than a loss of 57 cents. The Securities and Exchange Commission ruled the costs of funding a $3-billion healthcare fund and other expenses could be spread over seven years. Deutsche Bank raised its GM rating to “hold” from “sell.”

GM’s advance helped send automobile-related stocks higher. Ford Motor climbed 20 cents to $7.17.

* McDonald’s added 44 cents to $35.83. The company said April sales at European restaurants open at least 13 months jumped 9.3% from a year earlier. Sales at such stores increased 4.1% in the U.S. on the debut of stronger coffee and premium-chicken sandwiches.

* Dell slid $1.23, or 4.7%, to $25.20. Earnings for its fiscal first quarter ended May 5 were 33 cents a share, less than the company’s forecast of 36 cents to 38 cents. Revenue was $14.2 billion, compared with a prediction of $14.2 billion to $14.6 billion. Dell said it would announce more detailed results May 18.

An S&P; 500 index of technology shares lost 0.5%. Hewlett-Packard dropped 67 cents to $33.12.

* Soaring gold prices lifted mining companies. Freeport-McMoRan Copper & Gold rose $2.86 to $69.47. Newmont Mining added $2.20 to $57.93.

A gauge of raw-material producers added 0.8%, the biggest gain among 10 industry groups in the S&P; 500.

* Cisco Systems fell to $21.39 in extended trading as the company’s forecast overshadowed quarterly profit that topped some analysts’ estimates. The world’s biggest maker of computer-networking equipment forecast sales of about $28 billion in fiscal 2006, in line with analysts’ average estimate, Thomson Financial said. Cisco fell 8 cents to $21.68 in regular trading.

* Fluor rallied $8.20, or 8.8%, to $101.95. The largest publicly traded U.S. engineering and construction company said it would earn $2.90 to $3.20 a share this year, more than its previous forecast of $2.80 to $3.10, on growth in its businesses outside of government contracts.

“The best profits that you are seeing for 2006 are occurring just as we speak,” said Robert Rodriguez, who oversees $6.5 billion as chief executive and director of First Pacific Advisors Inc. in Los Angeles. He expects earnings growth to slow to 5% to 7% by 2007.

* The S&P; 500’s worst performer was Watson Pharmaceuticals, which fell $2.54, or 8.5%, to $27.45. The maker of generic drugs said per-share profit this year would be $1.25 to $1.33. Analysts expect $1.38, according to a Thomson survey. Thomson does not provide the parameters of its estimates to Bloomberg News.

* Residential mortgage lender Fannie Mae said more errors had been uncovered in the government-ordered review of its accounting. Fannie Mae nonetheless rose $1.38 to $51.52.