Wall Street surges after manufacturing report
EmptyNEW YORK -- Wall Street began the fourth quarter with a huge rally Monday, 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.
While the beginning of the new quarter was an incentive for institutional investors to buy, the market was also encouraged that the worst might be over from the summer's credit and stock market turmoil. And new economic data might nudge the Federal Reserve toward another interest rate cut at its Oct. 30-31 meeting.
Investors bought financial shares on the belief that the industry has generally weathered the recent credit market upheaval. 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 to boost the economy after a report showed that manufacturing grew in September 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.
According to preliminary calculations, the Dow rose 191.92, or 1.38%, 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%, to 1,547.04, nearing its all-time trading high of 1,555.90 reached in July. The Nasdaq composite index rose 39.49, or 1.46%, to 2,740.99.