Major indexes post gains

From Times Staff and Wire Reports

Can the rest of Wall Street follow the Dow index’s lead?

The blue-chip Dow industrials closed at a record high Monday, but most other major indexes still were below their summer highs despite the day’s broad advance.

Trading volume was moderate, which left some analysts skeptical about the rally’s staying power.

In other markets on the first day of the fourth quarter, gold continued to surge, reaching a fresh 27-year high. Oil prices pulled back.


In the stock market the 30-share Dow surged 191.92 points, or 1.4%, to 14,087.55, surpassing its previous record close of 14,000.41 reached July 19.

The technology-heavy Nasdaq composite soared 39.49 points, or 1.5%, to 2,740.99, its highest level in more than six years.

Other market indexes also were up sharply but ended below their summer peaks. The Standard & Poor’s 500 gained 20.29 points, or 1.3%, to 1,547.04, shy of its record close of 1,553.08 set July 19. The Russell 2,000 small-stock index rose 2.4% to 824.74. Its record closing high was 855.77 on July 13.

Beaten-down financial stocks led the market’s surge, after Citigroup warned that its third-quarter profit would fall by 60% because of credit-related write-offs but added that it expected a “normal earnings environment” in the current quarter.


Swiss banking giant UBS also said it would take a large write-down for credit-related losses.

“What you’ve finally seen is all the bad news is out,” said Jerry Jordan, who helps oversee $500 million at Hellman Jordan Management in Boston. “You’ve got a situation where they’ve kitchen-sinked the quarter and everything that could be bad is now out there.”

Others said additional losses might loom for the banks if the economy slows sharply in 2008. But on Monday the news was enough to bring buyers back to financial stocks.

Citigroup rose $1.05 to $47.72, UBS gained $1.69 to $54.94, Comerica rallied $1.91 to $53.19, Countrywide Financial added 95 cents to $19.96 and Goldman Sachs surged $6.24 to $222.98.


Home builders rallied after Citigroup analysts said the 50% plunge in the stocks this year made them attractive.

Centex jumped $1.35 to $27.92, KB Home gained 91 cents to $25.97 and Hovnanian advanced 52 cents to $11.61.

In the broad market, winners topped losers by more than 3 to 1 on the Big Board. But trading volume didn’t surge, suggesting that the buying lacked intensity, some analysts said.

Trading patterns during the session indicated that professional money managers who were light on stocks during the last few weeks were trying to buy in a hurry because they felt pressure to quickly boost their performance, said Joe Saluzzi, co-head of equity trading at Themis Trading in Chatham, N.J.


“Most likely it’s guys who are coming in late, and that’s not a great sign,” he said. “I wouldn’t get too giddy here.”

“Short covering” also may have helped depressed stocks, as traders who had sold the shares short, betting on further declines, rushed in to buy the stocks to close out their trades.

Market bulls, however, said the rally of recent weeks reflected many investors’ optimism that the U.S. economy would continue to expand, bolstered by Federal Reserve interest rate cuts.

“The market is getting increasingly convinced that the Fed will do whatever it has to do to contain the housing problem,” said Jim Awad, chairman of W.P. Stewart & Co. Ltd. in New York.


What’s more, shares of companies that are beneficiaries of rapid growth outside the U.S. are continuing to lead the market, analysts noted. That group includes industrial giants such as Deere, which rose $2.50 to a record $150.92, and many tech companies, including IBM, which gained $1.23 to $119.03.

Wall Street got some help from oil, which fell for a second session. Near-term futures dropped $1.42 to $80.24 a barrel.

Other commodities were mixed, but gold zoomed again, with near-term futures up $4.40 to $747.20 an ounce, the highest since 1980. Gold rose even though the dollar rallied, with the euro easing to $1.424 from Friday’s record high of $1.427.

With quarterly earnings-reporting season looming, one stock showed that investors may be merciless if companies don’t meet what are generally low expectations for profit growth in the latest period: Walgreen plunged $7.08, or 15%, to $40.16 after the drugstore chain said earnings fell about 4% in its quarter ended Aug. 31.