Nasdaq Racks Up Biggest-Ever Gain
By Elizabeth Lazarowitz Dec 5 5:00pm ET
NEW YORK (Reuters) - Stocks shot higher on Tuesday, launching the Nasdaq market up more than 10 percent -- its biggest one-day gain ever -- on speculation the Federal Reserve may soon cut interest rates and the drawn-out battle for the White House is nearing an end.
The huge rally came after technology stocks in November suffered their worst month since October 1987 with a 23 percent dive on investors' worries about slowing growth. Even Fed Chairman Alan Greenspan now acknowledges the U.S. economy has already lost momentum, and on Tuesday hinted the Fed may be willing to contemplate lower interest rates.
The Nasdaq Composite Index (.IXIC) rocketed up 274.05 points, or 10.48 percent, to 2,889.80. The rise eclipsed Nasdaq's previous record day -- up 7.94 percent on May 30 this year -- and also was the index's largest point gain since it was founded in 1971.
The prospect of lower rates emboldened investors to snap up beaten-down tech shares. They also were encouraged as Republican George W. Bush inched closer to victory after a series of key court decisions. That lifted the cloud of uncertainty that has hovered over global markets for about a month now.
``There had been a sort of a buyers' strike, because of the uncertainty out there -- not the least of which was due to the election,'' said Donald Berdine, chief investment officer at PNC Advisors. ``Greenspan was as dovish as one could ever expect him to be, a signal that the Fed may be willing to focus on economic growth rather than inflationary risks.''
The Dow Jones Industrial average (.DJI) soared 338.62 points, or 3.21 percent, to 10,898.72. The broader Standard & Poor's 500 Index (.SPX) jumped 51.57 points, or 3.89 percent, to 1,376.54.
For the year to date, the Dow is off 5.20 percent, while the S&P 500 is off 6.32 percent, and the Nasdaq is off 28.99 percent.
Treasuries, which often struggle to attract investors when stocks soar, also racked up impressive gains, sending yields tumbling sharply in the opposite direction.
Greenspan said the Fed was closely monitoring the economy's transition to a more sustainable pace of growth, signaling the central bank no longer views inflation as the main threat to the world's biggest economy.
``The Fed has said basically they're very cognizant of the impact all the tightening has had ... and now the risks are on the other side,'' said Charles Lemonides, chief investment officer at M&R Capital Management. ``That's what the markets have been looking for.''
The inflation-fighting Fed, which has hiked interest rates six times since June 1999, next meets to decide monetary policy on Dec. 19. The Fed is expected to leave key short-term rates unchanged, but economists believe it will take a more balanced view of economic conditions, shifting away from the potential for overheating. Such a move would open the door to interest- rate cuts next year.
Interest-rate-sensitive financial stocks got a boost from speculation about lower rates, buoying the blue-chip Dow index. J.P. Morgan & Co. Inc. (JPM.N) surged $13-1/8 to $151-5/8, Citigroup Inc. (C.N) gained $2-15/16 to $50-3/4, and American Express Co. (AXP.N) added $2 to $54.
Minnesota Mining and Manufacturing (MMM.N), the industrial conglomerate known as 3M, was among the Dow's biggest winners, surging more than 11 percent, or $11-5/8, to $116-5/8. The shares hit a fresh year high of $118-11/16 in afternoon trading, lifted by news the company named a General Electric (GE.N) executive as its new chief.
Cisco Systems Inc. (CSCO.O), the world's No. 1 provider of gear that powers the Internet, led the Nasdaq higher with a gain of $6-5/16 to $52-1/8. Intel Corp. (INTC.O), the world's No. 1 chip maker and a Dow component, rose $3-1/16 to $36.
International Business Machines (IBM.N) gained $5 to $103-3/8, Microsoft Corp. (MSFT.O) climbed $3-7/16 to $59-7/8, and Hewlett-Packard Co. (HWP.N) rose $2 to $35 -- all three strengthening the Dow.
Finland's Nokia (NOK1V.HE) (NOK.N), the world's largest mobile phone maker, sprinted $6-13/16 higher to $51-3/8 on a bullish revenue growth forecast. Its American Depositary Receipts were the most actively traded issue on the Big Board.
Not all technology stocks enjoyed rosy performances. Data networking firm 3Com Corp. (COMS.O) sank 25 percent, or $3-11/32 to $10-1/32, after it warned of soft quarterly results, citing sluggishness in the telecom industry.
Natural MicroSystems Corp.(NMSS.O) spiraled down 53 percent, or $9-7/8, to $8-7/8 after warning of lackluster earnings due to a slowdown in the telecom industry.
But the market's good cheer infected even members of some of the most beaten-down technology sectors like communications chip maker PMC-Sierra Inc. (PMCS.O), which vaulted nearly 27 percent higher, or $26-15/16, to $127.
``In the case of the Nasdaq market, it may have been a bounce off of some very, very depressed levels,'' Lemonides said. ``For the broader market it might be the first leg of a move higher.'' |
