Blue Chips, Net Stocks Pace Rally; Foreign Markets Surge
Investors’ return on Monday to some old favorite stocks, and heavy buying of some new favorites, helped push the market broadly higher--and lifted blue-chip indexes to record highs.
Stocks were also up sharply in many key foreign markets Monday, and that continued in early Asian trading today.
The Dow Jones industrial average soared 214.72 points, or 2.3%, to a record 9,374.27, eclipsing the old high of 9,337.97 set July 17.
The Standard & Poor’s 500 index also reached a new high, rising 2.1% to 1,188.21, topping the July 17 high of 1,186.75.
The Nasdaq composite shot up 2.6% to 1,977.42, lifted in part by another round of huge gains in many Internet stocks. But the Nasdaq index remains a 1.9% rise away from its summer peak of 2,014.25.
Smaller stocks lagged blue chips, with the Russell 2,000 index up 1% for the day. Also, winners topped losers by just 22 to 19 on Nasdaq, while NYSE winners had a 19-12 edge over losers.
Trading volume also was surprisingly modest for such a big one-day Dow gain.
Still, analysts said the market’s opening on Monday found many U.S. investors ready to buy, after another rally overnight in foreign markets.
Hong Kong’s key index, for example, jumped 2.8% on Monday to 10,514 amid growing optimism that East Asia’s economy is bottoming after 17 months of woe.
Hong Kong shares have leaped 33% since Oct. 1.
Also Monday, the Singapore market jumped 2.2%.
Early today in Asia, Hong Kong stocks rose 2.8% and Japan’s market, closed Monday, was up 2.2%.
On Monday, heavy buying sent German stocks up 2.2% and the Mexican market up 3.4%.
With U.S. and European central banks having cut interest rates since September to calm the global turmoil that followed Russia’s ruble devaluation and worries about Brazil’s economic health, “people just underestimated how powerful the effect of those interest rate cuts are for the stock market,” said Robert Streed, a money manager with Northern Trust Co.
“There was outright fear in October, but the psychology changed. It went from being so bad to so good in such a short period.”
The U.S. rally Monday was also helped by another round of merger mania, which suggests companies see value in one another even at reinflated stock prices.
“We’ve got a mania for stocks right now, and you can’t really make a rational explanation for what we have witnessed over the last six weeks,” said Richard A. Dickson, analyst at Scott & Stringfellow in Richmond, Va., noting that economic and financial instability overseas still poses a big risk.
Meanwhile, Treasury bond yields were up modestly Monday. In commodity markets, prices continued to move lower, bolstering the outlook for low inflation worldwide.
Among Monday’s highlights:
* Internet stocks zoomed again after America Online said it may buy Netscape Communications. AOL rose $4.38 to $89.25 and Netscape added $2.75 to $41.94.
Other stocks in the sector rose at a torrid pace, even for this group: EBay soared $46, or 31%, to $193; Amazon.com leaped $37.38, or 21%, to $218; and Yahoo surged $30.44, or 16%, to $221.44.
* Old blue-chip favorites rising sharply Monday included Coca-Cola, up $2.63 to $75.44; IBM, up $6.44 to $166.56; Merck, up $4.50 to $156; and Philip Morris, up $2.50 to $58.25.
* Financial stocks rallied as Deutsche Bank said it wants to buy Bankers Trust. Big gainers included Merrill Lynch, up $4.38 to $76; Franklin Resources, up $4.38 to $44.88; and Charles Schwab, up $6.19 to $59.19. Among banks, J.P. Morgan leaped $6.25 to $115.88 and Citigroup gained $3.94 to $49.
* On the downside, energy stocks weakened further, as oil fell again.
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Market Roundup, C12
