Here’s What’s Fueling Nasdaq’s Run
Semiconductors and networking stocks powered a 4.8% Nasdaq gain Monday that
not only built on last week’s 4.3% gain but also took the average to a
three-month high to close above the 2300 level. The rally spilled over into the
blue chips, taking the S&P 500 up 1.6% and the Dow up 0.3%.
By the close, the Nasdaq and S&P 500 had achieved their highest levels
since February, and the Dow closed at levels not seen since September 2000. The
Nasdaq has now bounced back more than 42% from its April 4 intraday low of
1619.58.
Volume was healthy, as 2.3 billion shares traded on the Nasdaq and 1.18
billion shares changed hands on the NYSE.
Some analysts attribute the ongoing recovery in stocks to the positive
consensus forming that the five-month string of Fed rate cuts will help jump
start the slowing economy.
“There is an old saying that ‘The Fed writes the stock market newsletter’.
This is true today. An aggressive
regimen of rate cuts has ended the bear market. The
prospects for economic recovery are greatly enhanced,” said Paul Rabbitt,
President, RabbittAnalytics.com.
“Although no broad economic
benefits can be expected for another six months, the psychological effects of
the rate cuts are significant. Investors
have rightly begun to ‘look across the earnings valley’ toward 2002,” he
added.
According to preliminary numbers, the Nasdaq rose 106.68 to 2305.56, the Dow
lifted 36.18 to 11,337.92, and the S&P 500 added 20.87 to 1312.83.
Top sectors included semiconductors
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broker/dealers
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Most sectors were solidly in the green, but one weak spot was the integrated
oils
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Semis leading the red-hot SOX were Linear Technologies
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Teradyne
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up 9.2%.
Several of the fallen tech giants booked solid gains which helped them
continue to claw their way back from their early-April lows. Sun Microsystems
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gained 2.99 or 15% to 22.96, Cisco
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tacked on 1.82 to 18.10.
Sun and Cisco broke out from bases on heavier-than-average volume and closed
at their highest levels since early April and are both solidly above their
respective 50-day moving averages.
Among Net-related stocks flexing muscle was America Online
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rose 2.17 to 56.60 on heavier-than-average volume. AOL has been on quite a run
since its April 3 intraday low of 33.46, and is now 8 points above its 200-day
moving average and at its highest level since early January.
In the broker/dealers, Schwab
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rose 5.3%, and Goldman Sachs
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Looking ahead, noteworthy economic news due out later this week includes
April’s new home sales on Thursday at 10:00 AM ET and April’s existing home
sales on Friday at 10:00 AM ET. Analysts expect figures of 980,000 and 5.28
million, respectively.