Stocks ended higher on Monday as investors brushed aside worries about possible terrorist actions against financial institutions to focus on some strong corporate news from the likes of consumer giant Procter & Gamble (PG). Trading volume was low.
The Dow Jones industrial average added 39.45 points, or 0.39%, to 10,179.16. The broader Standard & Poor's 500 index gained 4.90 points, or 0.44%, to 1,106.62. The tech-heavy Nasdaq composite strengthened 4.73 points, or 0.25%, to 1,892.09. Among the top-performing sectors were homebuilding, household products, and real estate investment trusts.
Based on Monday's price action, it appears that some bulls are
gaining confidence that last week's lows mark a near-term market bottom, according to Standard & Poor's MarketScope.
Investors can look forward to a steady stream of earnings news in Tuesday's session. Among the companies due to report are health services outfit Tenet Healthcare (THC), drugmaker Watson Pharmaceuticals (WPI) , conglomerate Tyco International (TYC), and phone company Qwest Communications (Q).
There will be more news on the economics front as well. June figures for personal income are expected to show a decline to no growth from 0.6% growth in May. And domestic auto sales in July are seen rising to 13.7 million from 12.2 million in the previous month.
Among the stocks in the news Monday, Dow component P&G moved higher. The name behind Tide laundry detergent and other consumer products reported quarterly profit that topped expectations thanks to strong sales in most of its product lines.
Shares of for-profit education company Corinthian Colleges (COCO) plunged after it said fourth-quarter results would be below forecast due to a revenue shortfall, and higher marketing, advertising, and education services expenses.
Keeping a lid on stocks was news that U.S. officials alerted the nation about a "high" threat of terrorism directed at financial institutions such as the New York Stock Exchange and Citigroup (C), the New York-based financial services giant. Other possible al Qaeda targets, according to authorities: the World Bank, the International Monetary Fund, and financial services firm Prudential (PRU). The U.S. Department of Homeland Security raised the terror level alert on Sunday.
The terrorism threats helped push the price of a barrel of crude oil to a 21-year record high of $43.93 a barrel before a pullback to $43.82 at the close. The market is worried that corporate profits will feel the squeeze if energy prices stay at elevated levels.
Economic news on Monday was mixed. The Institute of Supply Management's factory data for July came out just as expected, with the headline index at 62.0, vs. a prior 61.1 (median estimate 61.8). "This is just about smack in the middle of the range so far this year," says economic research firm Informa Global Markets. Any number over 50 still indicates expansion. Employment cooled, at 57.3, vs. 59.7. Informa called it "a reasonably encouraging report, except for jobs."
As expected, construction spending in June was somewhat softer than the previous month, down 0.3%, which compares with consensus for a 0.1% print, according to Informa. The softer reading comes as housing starts have exhibited an evident decline, reaching their lowest level in over a year in June.
In other stocks news, the family that controls a majority of Cox Communications (COX), the fourth largest cable television provider, offered shareholders $7.9 billion in cash to take it private. Cox shares surged on the news, and shares of fellow cable companies Comcast (CMCSA) and Cablevision (CVC) moved higher as well.
Cigarette maker Reynolds American (RAI), posted higher quarterly profit thanks to improved results at its R.J. Reynolds Tobacco Holdings Inc. unit despite lower sales.
Oil and gas producer Unocal (UCL) reported that its second-quarter profits nearly doubled thanks to higher commodity prices and lower exploration costs.
In exchange news, the New York Stock Exchange unveiled a plan for expanding electronic trading in an overhaul of its centuries-old open-outcry system, according to the Wall Street Journal. The WSJ said the plan would lift the size and timing restrictions on the token computer trading system, called Direct Plus, now in place, and would allow big investors to cancel orders that aren't immediately executed.
U.S. Treasuries finished higher in price on Monday. According to Informa, bonds opened stronger on safe-heaven buying, yet by closing time, some profit-taking had reduced previous gains. Terror concerns and oil price pressure dominated investor sentiment on Monday, overshadowing a report on U.S. factories reflecting solid output and a mild pullback in hiring.
European stock markets finished mixed on Monday. London's Financial Times-Stock Exchange 100 index was up 2.60 points, or 0.06%, to 4,415.70 as the U.S. terror alert triggered global concerns. But the market got a boost from report that a key gauge of U.K. manufacturing activity surged to near a 10-year high in July. BAA was lower even though its first quarter results rose 28%. HSBC was higher after saying profit in the first half advanced 55%, helped by the $15.5 billion purchase of U.S. lender Household International. Abbey National was higher after HBOS said it's considering a bid to challenge $14.8 billion offer by Santander Central Hispano.
Germany's DAX index fell 32.90 points, or 0.84%, to 3,862.71 as there was little reaction to a report that an index of German factory-sector activity rose to 56.5 in July from 55.0 in June. DaimlerChrysler, Volkswagen, and Bayerische Motoren Werke were lower on worries about high energy prices. Deutsche Bank was lower after Merrill Lynch lowered its estimates for this year and next.
In Paris, the CAC 40 index lost 23.31 points, or 0.64%, to 3,623.79 on the U.S. terror alert and on news that a French manufacturing index fell to 54.6 in July from 55.8. Business Objects was lower; after the largest shareholder sold 6% stake in company. Euro Disney was lower after lenders delayed a decision on refinancing for the theme park operator.
Asian markets finished lower on Friday. Japan's Nikkei 225 index dropped 103.54 points, or 0.91%, to close at 11,222.24, led lower by exporters on worries over U.S. economic outlook and weakened sentiment after the U.S. raised the security alert level to high for certain financial institutions on Sunday as intelligence suggested a possible threat. Toyota Motor fell 1.1% while Sony edged down 0.5%. But shares of Japan's No. 3 shipping line Kawasaki Kisen surged after it raised its full-year net income forecast. Mitsui O.S.K. Lines leapt 5.2% after Goldman Sachs upgraded the stock to outperform.
In Hong Kong, the Hang Seng index eased 36.34 points, or 0.30%, to close at 12,201.39, with Bank of East Asia tumbling after it reported weaker-than-expected earnings on Friday. China carmaker Brilliance also sank after local media reported that four executives had resigned. HSBC traded almost flat ahead of its first half earnings report.