Dow closes above 14,000 first time in 2 1/2 months
NEW YORK » Wall Street began the fourth quarter with a huge rally yesterday, sending the Dow Jones industrial average above 14,000 and well into record territory for the first time in 2 1/2 months.
Stocks were buoyed by a growing belief that the worst of the credit crisis has past.
Both Citigroup and Switzerland's UBS AG issued third-quarter profit warnings, but indicated the current period might see a return to normal earnings levels.
The market grew more optimistic that the Fed might lower rates at its Oct. 30-31 meeting to boost the economy after a report showed that manufacturing grew in Sep-tember at the slowest pace in six months. The Institute for Supply Management said its index of manufacturing activity registered at 52.0 in September, below forecasts for a reading of at least 52.5.
"People are getting more confident there is going to be an October rate cut," said John C. Forelli, portfolio manager for Independence Investment. "To some degree, it looks like Citi kitchen-sinked the quarter, and that from here going forward will be calmer. That's underpinning the financials."
Enthusiasm about acquisition activity picked up after Nokia unveiled an $8.1 billion offer to buy navigation-software maker Navteq Corp. The deal was seen as a signal that corporations are feeling comfortable in making big moves despite recent market turbulence.
The Dow rose 191.92, or 1.38 percent, to 14,087.55.
The Dow surpassed its closing record of 14,000.41 set in mid-July, and moved into record territory, rising as high as 14,115.51 and eclipsing its previous intraday high of 14,021.95 set July 17.
Broader market indexes also rose sharply. The Standard & Poor's 500 index rose 20.29, or 1.33 percent, to 1,547.04, nearing its all-time trading high of 1,555.90, also reached in mid-July. The Nasdaq composite index rose 39.49, or 1.46 percent, to 2,740.99; the tech-laden index remains well below its high of 5,048.62, reached in 2000 when it was bloated by the dot-com boom.
The Russell 2000 index of smaller companies was up 19.29, or 2.39 percent, at 824.74.
Advancing issues led decliners by a 3 to 1 basis on the New York Stock Exchange, where volume hit 1.18 billion shares, up from 1.03 billion shares on Friday.
Bonds moved higher yesterday, with the yield on the benchmark 10-year Treasury note falling to 4.55 percent from 4.59 percent late Friday.
The dollar was mixed yesterday against other major currencies, while gold prices rose.
A barrel of light, sweet crude fell $1.42 to $80.24 on the New York Mercantile Exchange.
Citigroup shares rose $1.05, or 2.3 percent, to $47.72. Countrywide Financial Corp., the nation's largest home loan provider, rose 95 cents, or 5 percent, to $19.96 on the potential of an easing in subprime loan jitters.
UBS, the largest Swiss bank, rose $1.69, or 3.2 percent, to $54.94 after warning it would take a pretax loss of up to $690 million in the quarter and cut 1,500 jobs.