Market Snapshot update: Investors in a buying mood again
By Martin Cej & Rex Nutting, CBS.MarketWatch.com
Last Update: 1:03 PM ET Sep 24, 2001
NEW YORK (CBS.MW) - American investors returned to the markets in a buying mood Monday, pushing U.S. stock averages higher in a broad-based rally.
Nearly every blue-chip stock and sector index was higher after a weeklong rout depressed stock prices to three-year lows in the worst blue-chip sell-off since the Depression.
"We were oversold by every measure," said Art Hogan, chief market strategist at Jefferies & Co. "This is exactly what you'd expect to happen."
The Dow Jones Industrial Average ($INDU) rallied 363 points, or 4.4 percent, to 8,599 led by General Electric, Intel, Home Depot and Boeing. Merck, Philip Morris and McDonald's declined.
"This market has deeply discounted a lot of negative news," said Peter Cardillo, chief strategist at Westfalia Securities. Listen to more from Cardillo.
Some big money managers decided it was time to invest again even as more companies warned of weaker profits.
Abby Joseph Cohen, Goldman Sachs's head of investment strategy, bolstered optimism by raising the recommended equity weighing in the firm's model portfolio to 75 percent from 70 percent.
Bank of America Securities' Tom McManus also boosted his equity weighting to 70 percent from 65 percent and reduced bond holdings to 25 percent.
The Nasdaq Composite ($COMPQ) jumped 79 points, or 5.6 percent, to 1,503 with semiconductors ($SOX), networking issues ($NWX) and hardware-related shares ($GHA) contributing to the advance. The Nasdaq Composite suffered through its third-worst week ever last week.
The Nasdaq 100 Index ($NDX) rose 6.1 percent Monday.
Some big technology companies -- Intel, Sun Microsystems, Oracle, EMC, Texas Instruments and Dell Computer -- gained more than 10 percent.
The S&P 500 ($SPX) gained 37 points, or 3.9 percent, to 1,003. The Russell 2000 Index of small-cap stocks ($RUT) climbed 3.4 percent.
Rising stocks outnumbered falling issues by about 5 to 2 on the NYSE and 3 to 1 on the Nasdaq. About 870 million shares had traded on the NYSE, while Nasdaq volume hit 1.06 billion.
Investor optimism was tempered by a stream of earnings warnings from a cross-section of the economy. Fiber-optic gear maker JDS Uniphase, Federated Department Stores, Instinet and Potash Corp., the world's largest fertilizer maker, warned that earnings will fall short of previous estimates.
Goldman's Cohen said undervaluation, government policy initiatives, corporate decisions to buy back shares, idle cash and confidence from uninterrupted operations in the banking system will help to support the equity markets.
Brian Belski, fundamental market strategist for U.S. Bancorp Piper Jaffray, said small-caps have had their day. "Investors should increase exposure to large-cap stocks," he said. Even with profit expectations sinking, Belski said the S&P 500 would give a greater return than 10-year Treasurys.
"I don't expect a 300 or 400 point gain every day, but I expect we'll find a level of support," Jefferies' Hogan said. "This will be a seek of stabilization."
Westfalia's Cardillo warned that Friday's lows could be retested again this week.
Doug Cliggott, equity strategist for JP Morgan, said the bear market that began in early 2000 "may have quite a bit further to run."
Airline stocks got a boost from the $15 billion aid package approved by Congress. The airline index ($XAL) gained 6.1 percent.
Last week's defensive plays turned lower. Oil stocks ($XOI), gold ($XAU) and commodities fell. Oil futures plunged 14 percent to $22.38 a barrel.
Warnings
Shares of JDS Uniphase (JDSU) surged 91 cents, or 17 percent, to $6.27 even as it warned that it expects sales of roughly $325 million in the first quarter. The fiber-optics company said it believes that it's seeing the early signs of stabilization "at levels from which our industry can grow in the future."
Federated Department Stores (FD) said sales since Sept. 11 are running approximately 20 percent below expectations. Unless sales trends change dramatically, "which does not appear likely," earnings estimates would also have to be lowered, the company said.
Last week's slide failed to dissuade at least one company from expanding. VeriSign said it would acquire Illuminet Holdings, a provider of network connectivity and services to telecom carriers, for $1.2 billion in stock. VeriSign fell 35 cents to $36.95, while Illuminent dipped 43 cents to $34.55.
Economic watch
The Conference Board said the index of leading indicators fell 0.3 percent in August, indicating continuing weakness in the economy even before the terrorist attacks. The leading index, which is designed to forecast turning points in the economy, had risen four months in a row. Read more.
Investors and analysts will get a glimpse at the state of the U.S. consumer with the release of consumer confidence figures Tuesday, as well as durable goods orders and new home sales for August out Thursday. Friday sees the release of second-quarter gross domestic product data. and Economic Calendar.
Bonds
Treasury securities weakened Monday at the hands of an improved stock market, pushing their yields up from the historic lows notched last week.
At last check, a 2-year note shed 5/32 at 101 8/32 to yield 2.95 percent or a gain of 8 basis points from the previous U.S. session. A 10-year note fell 11/32 at 102 3/32 to yield ($TNX: news, chart, profile) 4.73 percent or a gain of 4 basis points, while a 30-year bond shed 7/32 at 96 26/32 to yield ($TYX: news, chart, profile) 5.60 percent or a gain of 1 basis point.
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