Broad Rally Extends Year’s Rebound

Wall Street on Monday put a flourish on its powerful 2003 rebound as a strong rally drove share prices up across the board -- and sent the main Nasdaq index to its first close above 2,000 in nearly two years.

The technology-dominated Nasdaq composite index jumped 33.34 points, or 1.7%, to 2,006.48, the highest close since Jan. 15, 2002.

The Dow Jones industrial average ended at 10,450.00, up 125.33 points, or 1.2%, its biggest percentage gain in a month. It was the blue-chip index’s best closing level in 21 months.

Buyers were undeterred by continuing terrorism worries, concerns about “mad cow” disease and the sinking dollar. Instead, with the year drawing to a close, some market pros may have been focused on earning handsome annual bonuses by helping stocks end on a high note, some analysts said.

Because many investment managers are compensated in part based on their performance each year, “they want stocks to go out at top” prices, said Marc Pado, a market strategist for New York-based brokerage firm Cantor Fitzgerald.

Others said the rally reflected the general optimism about the economy and corporate earnings in 2004, and “short covering,” or buying by short-term traders who had wrongly bet recently that prices were headed lower.

Trading volume was muted, as is typical around the Christmas and New Year’s holidays. But rising stocks outnumbered losers by more than 3 to 1 on the New York Stock Exchange and by more than 2 to 1 on Nasdaq.

The rally pushed the Dow’s year-to-date gain to 25.3% and the Nasdaq index’s to 50.2%. If the market at least holds at these levels through the closing bell on Wednesday, the Dow’s advance will be its biggest for any calendar year since 1996.

For Nasdaq, the 50% gain so far pales in comparison with its 86% surge in 1999 -- the home stretch of that decade’s bull market.

A.C. Moore, chief market strategist at money manager Dunvegan Associates in Santa Barbara, said most of the investors who were interested in making one last bet on stocks before the new year may have done so Monday, rather than hang around for the final two trading days of 2003.

Buyers may have “come in and got it done, and [will] go away for the week,” he said.

U.S. stock markets will be open full sessions today and Wednesday, will be closed New Year’s Day, then will be open a full session Friday, the first trading day of 2004.

Blue-chip stocks have been on a winning streak all month. The Dow added 0.5% last week, the fifth straight weekly advance, and is up 668 points, or 6.8%, this month.

But in recent days many investors have been snapping up the smaller stocks that had led the market for most of this year before pulling back earlier this month. The Russell 2,000 index of smaller shares jumped 8.98 points, or 1.6%, to 563.88 on Monday, its highest close in more than three years.

That beat the 1.2%, 13.59-point rise of the blue-chip Standard & Poor’s 500 index, which closed at 1,109.48, a 20-month high.

For the Nasdaq composite index, closing above 2,000 shows that demand for many technology shares remains strong.

But it also provides a reminder of how far tech shares have to go to recoup their bear-market losses.

The index still is 60% below its all-time closing high of 5,048.62 reached March 10, 2000.

The Dow, by contrast, is less than 11% below its record high of 11,722.98 reached Jan. 14, 2000.

In other markets Monday:

* The dollar continued to sink, falling to a record low of $1.249 per euro from $1.243 on Friday, and to 106.91 yen from 107.17.

* Gold reached a seven-year high, benefiting as an alternative to the dollar. Near-term gold futures in New York added $2.50 to $414.80 an ounce.

* Treasury bond yields rose. The 10-year T-note ended at 4.24%, up from 4.15% on Friday. The yield had been as high as 4.40% earlier this month.

Market Roundup, C5-6