Markets & Finance

Stocks Surge on Recovery Hopes


Stocks ended solidly higher Monday, as positive corporate news bolstered hopes for a second-half economic turnaround. Shifting asset allocations from bonds to stocks added fuel to the rally, according to S&P's MarketScope.

The Dow Jones industrial average jumped 146.58 points, or 1.62%, to 9,216.79. The broader Standard & Poor's 500 index was up 18.8 points, or 1.91%, to 1,004.5. Meanwhile, gains in software behemoth Microsoft led the tech-heavy Nasdaq composite up 57.79 points, or 3.47%, to 1,721.25 -- its highest closing price since May 17, 2002.

Cash-rich Microsoft (MSFT) said it would consider paying a special $10 billion dividend to shareholders, according to a report in the Financial Times. Shares in Microsoft jumped 3.5% Monday.

Financial and brokerage stocks were among Monday's best performers, helped by a Merrill Lynch (ML) upgrade of Morgan Stanley (MWD).

Semiconductor stocks also showed relative strength, on reports of increased PC demand in Japan. Chip-making giant Intel (INTC) led all stocks in the Dow with a 5.5% increase in price Monday.

After the close of the previous trading session, software maker Siebel Systems (SEBL) announced it would cut costs by laying off workers and restructuring to help earnings. The shares advanced 3.1%.

Corporate acquisitions were in the news Monday. Clothier VF Corp. (VFC), maker of Lee and Wrangler brand jeans, said it would buy designer Nautica Enterprises (NAUT) in a $586 million acquisition. Nautica shares spiked on the news.

Cable company Comcast (CMCSA) said it would sell its stake in home-shopping network QVC to Liberty Media (L) for $7.9 billion.

Canadian aluminum company Alcan (AL) launched a $3.9 billion hostile bid for French rival Pechiney (PY).

Drugmaker Schering-Plough (SGP) warned that 2003 earnings would be lower than expected, owing to eroding sales of its best-selling drugs.

Fast-food restaurant Wendy's International (WEN) reported a 1.9% decline in same-store sales. Wendy's also lowered yearly earnings guidance.

No major economic data were released Monday. Tuesday brings consumer credit data, which economic research outfit MMS International sees expanding to $10 billion in May, slightly down from April's $10.7 billion.

The rest of a relatively quiet week on the economic front brings May wholsale trade data, import and export price indices from June, May trade balance figures, and the June producer price index. "Traders anticipate an increase in June producer prices which should discourage any lingering market concerns of deflation," notes MMS.

The dearth of economic data could result in a volatile trading week, with another round of quarterly corporate earnings announcements getting underway Tuesday, according to S&P's MarketScope.

Internet portal Yahoo! (YHOO) saw shares climb past 52-week highs in advance of an expected strong quarterly earnings announcement on Tuesday.

The rest of the week brings earnings news from well-known companies such as Alcoa (AA), Pepsico (PEP), and General Electric (GE).

In currency news, the euro sank to two-month lows against the U.S. dollar.

Treasury Market

Prices of U.S. Treasuries finished lower Monday, as investors shifted money to stocks amid hopes of a second-half economic rebound. The benchmark 10-year note's yield moved up to 3.71%.

Trading was thin after the long weekend, according to MMS International. "Surging equities added to the more defensive tone in bonds as Wall Street looks toward improved economic growth prospects over the second half of the year," says MMS.

World Markets

European markets finished higher Monday on economic rebound hopes. In London, the Financial Times-Stock Exchange 100 added 53.3 points, or 1.33%, to 4,074.8, as investors shrugged off a report that U.K. manufacturing production slowed in May. In Germany, the DAX Index gained 93.26 points, or 2.88%, to 3,332.87. In France, the CAC 40 was higher by 109.79 points, or 3.57%, to 3,182.19.

In Asia, major stock indexes ended with strong gains. Japan's Nikkei index finished up 247.43 points, or 2.59%, to 9,795.16, hitting a 10-month high during the session. Rumors surfaced that Japanese institutional investors decided to buy stocks to play catch up with the latest market rally, reports S&P MarketScope. Meanwhile, Hong Kong's Hang Seng index rose 255.59 points, or 2.65%, to 9,892.4.


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