Stocks Up on Economic Outlook
Monday May 21, 6:02 pm Eastern Time
<<NEW YORK (Reuters) - A technology rally fired up the stock market on Monday as investors counted on the Federal Reserve's five interest rate cuts this year to boost the U.S. economy, while bonds rose on a tame inflation outlook.
The euro slumped as a reweighting of global equity indexes diverted investments away from Europe. Gold prices surged to 11-month highs before ending lower as profit taking ate away all the day's gains and then some.
U.S. crude oil prices passed $30 a barrel on concerns about gasoline supplies ahead of summer driving season.
``This is an extraordinary time where we're likely to see all-time highs coming in a steady advance. I expect the S&P 500 will be 30 percent higher at year-end,'' said Robert S. Robbins, chief market strategist at brokerage house Robinson-Humphrey Co.. ''Defensive issues aren't working today, because we're in a new bull market and you have to be aggressive and risk-taking in a bull market.''
Indeed, investors shifted out of safe havens and funneled money into the volatile tech sector, traditionally a high-growth area, on hopes the Fed's aggressive monetary easing will stoke an economic recovery. The market kicked off its rally last week after the central bank slashed interest rates for the fifth time this year by a half a percentage point.
The Nasdaq Composite Index(.IXIC) shot up about 106.67 points, or 4.85 percent, to 2,305.55. Cisco Systems Inc.(NasdaqNM:CSCO - news), the world's largest maker of gear that powers the Internet, led the tech-packed index higher -- rising $2.67 to $22.87 and piercing through the $21 mark for the first time since March.
The Dow Jones industrial average(.DJI) gained 36.18, or 0.32 percent, to 11,337.92. Walt Disney Co.(NYSE:DIS - news), up $1.68 at $34.28, joined high-tech companies in lifting the blue-chip gauge. Investment house Salomon Smith Barney raised its investment rating on the entertainment giant, pointing to potential box-office success of the movie ``Pearl Harbor.''
The broader Standard & Poor's 500 Index(.SPX) rallied 20.87 points, or 1.62 percent, to 1,312.83, racking up its sixth straight winning session.
``People are looking ahead for when earnings are going to turn, because it appears the Fed is insistent on getting the economy moving,'' said John Davidson, chief investment officer at Circle Trust Co., which has $8 billion under management. ``People believe this is eventually going to work.''
Intel Corp.(NasdaqNM:INTC - news) rose $1.14 to $29.90, boosting both the Nasdaq and the Dow. The world's largest computer chip maker said it had begun shipments of a new series of speedy microprocessors.
The Philadelphia semiconductor index(.SOXX) rocketed 7.41 percent, reflecting gains by other chip-related companies. Applied Materials Inc.(NasdaqNM:AMAT - news), the world's biggest maker of semiconductor equipment, gained $2.52 to $57.52. Its rival KLA-Tencor Corp.(NasdaqNM:KLAC - news) surged $5.13 to $60.59.
Other technology shares followed the upward trend. Software giant Microsoft Corp.(NasdaqNM:MSFT - news) rose 70 cents to $68.79. Network computer maker Sun Microsystems Inc.(NasdaqNM:SUNW - news) climbed $2.99 to $22.96. Business software company Oracle Corp.(NasdaqNM:ORCL - news) jumped $1.82 to $18.10. Computer heavyweight International Business Machines Corp.(NYSE:IBM - news) gained $1.60 to $119.04.
Palm Inc. (NasdaqNM:PALM - news) gained 89 cents at $5.94 after Wall Street house UBS Warburg upgraded the handheld computer maker, explaining the company was working hard to remedy inventory problems and enter the next fiscal year in better shape.
``The expectation is CEOs of tech companies are going to start whistling a different tune, saying business is dismal but not as dismal. That gives investors light at the end of the tunnel that the profit recession is going to end,'' said Hugh Johnson, chief investment officer at First Albany Corp.
``In the early stages of a bull market, tech stocks do well. When you are about to come out of a profit recession, tech stocks do well,'' he added.
Consumer products giant Procter & Gamble Co.(NYSE:PG - news), fell $2.23 to close at $65.25, pressuring the Dow. P&G said it agreed to buy the Clairol hair-care business from Bristol-Myers Squibb Co.(NYSE:BMY - news) for $4.95 billion in a deal that will offer a leading position in the hair-care products market. Bristol-Myers was off 71 cents at $55.29.
Other defensive issues also dropped. Cigarette maker Philip Morris Cos. Inc.(NYSE:MO - news) fell $2.24 to $50.13. Drug giant Johnson & Johnson(NYSE:JNJ - news) slipped 37 cents to $100.63. Oil company Exxon Mobil Corp.(NYSE:XOM - news) lost $1.45 to $88.75. All three weighed on the Dow.
Online music company MP3.com Inc.(NasdaqNM:MPPP - news) rocketed 61 percent, or $1.84, to $4.85. French media giant Vivendi Universal said on Sunday it will buy its one-time foe for about $372 million in hopes of bolstering its online music business.
At 5 p.m. EDT (2100 GMT), two-year Treasury notes were up 2/32 at 99-13/32, yielding 4.35 percent.
Benchmark 10-year notes were up 4/32 at 97-4/32, yielding 5.39 percent, while 30-year bonds rose 12/32 to 94-27/32, yielding 5.74 percent.
The euro settled at 87.68 cents, down from 88.12 late Friday. The dollar fell to 122.63 Japanese yen from 123.48 yen.
June gold jumped $10.80 to $298.60 an ounce, before ending $2 lower at $285.80 an ounce.
Gasoline for June delivery rose 3.07 cents a gallon at $1.0997, which buoyed other oil markers. June heating oil ended 0.78 cent a gallon higher at 81.22 cents and June crude oil rose 7 cents at $29.98 a barrel.
Overseas, London's blue-chip FTSE 100 index ended up 26.6 points or 0.45 percent at 5,941.6, retreating from a session high of 5,978.3. In Tokyo, the Nikkei average surged 2.15 percent or 299.06 points to close at 14,176.83.>> |
