Home Run For Blue Chips
The flight into cyclicals and defensive stocks continued at the expense of
technology stocks Monday, and that helped move the Dow 2.3% higher for its
third-straight winning day. The Dow moved back above both its 50- and 200-day
moving averages for the first time since October 5. Also strong were financial
stocks, which not only helped the Dow but also paced the S&P 500 to a 1.4%
gain.
Optical networkers, broadband chip chip makers, and Internet-related stocks
continued to fall, as the Nasdaq drifted 2.6% lower by the close.
Nasdaq relaxed in volume by about 16% from Friday’s level, as 2.06 billion
shares traded. NYSE volume eased by 7%, with 1.08 billion shares changing hands.
In economic news, personal spending rose 0.8% and personal income rose 1.1% for September.
Analysts had been looking for a 0.6% increase in spending and a 0.5% increase in
income, so Monday’s figures again hinted at inflationary pressures.
Stocks initially opened to the downside, but blue chips again stepped up to
the plate while technology stayed under pressure. Several analysts expressed
positive views for stocks and explained that there was indeed a light at the end
of the tunnel.
"Bull markets need worry, liquidity, and reasonable earnings. We have
those ingredients. Seasonally, this is the best time of year to buy. Stocks have
been shaken from weak hands. Expectations have become reasonable. Valuations
have improved. Dream stocks have been discarded for real companies — a healthy
development," said Paul Rabbitt, President, RabbittAnalytics.com.
"Mutual fund tax selling will wrap up on Tuesday, but worries over
technology earnings-growth, the high price of oil, ongoing tensions in the
Middle East, and election uncertainties will continue short-term pressure, thus
providing another week of buying opportunities," he added.
According to preliminary numbers, the Dow jumped 245.15 to 10835.77, the
Nasdaq sank 87.02 to 3191.34, and the S&P 500 added 19.07 to 1398.65.
Top sectors of the day were forest and paper products
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7.6%, airlines
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On the weaker side were technology
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Powering the Dow’s advance were gains by Alcoa
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Paper
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6.3%. The biggest Dow loser was Intel
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Weighing on tech was Cisco Systems
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1/16 following a downgrade by Lehman Brothers.
Tech favorites that continued to fall from grace included Newport
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down 18%, Network Appliance
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8%, and Juniper
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Looking ahead, the October consumer confidence numbers and the September new
home sales will be released at 10:00 AM ET. Street estimates look for a 140.0
reading in consumer confidence and 894,000 new home sales.