Wall Street cracks 5,600 barrier

Shares in the US put on such a dazzling performance yesterday morning that the New York Stock Exchange's automatic curbs on computer- driven trades had come into force before lunchtime, writes Diane Coyle.

The Dow Jones industrials index was 69 points, higher at 5,6102 in early afternoon trading. Treasury bond prices also rose.

Even as the index soared some analysts had begun to predict an inevitable correction. One Wall Street analyst said: "My feeling is that this rally can end any time. It's really scary."

There was no new economic news to explain yesterday's surge, although Robert Rubin, Treasury Secretary, made encouraging remarks about the chances of a deal between the President and Congress on the Federal budget. Most analysts resorted to the argument that investors are simply in a bullish mood.

Robert Freedman, chief investment officer at John Hancock, an $18bn mututal fund, said:

"Investors probably believe we are seeing the fabled soft landing, that perfect blend of lower interest rates and higher corporate profits."

Most companies' fourth-quarter earnings have been better than analysts' expectations, raising hopes that the economic slowdown is not grave enough to threaten profits.

Yesterday frozen food manufacturer Foodbrands America and Dataworks provided the unexpectedly good results, though semiconductor shares and telecoms shares also advanced sharply.