Stocks finished with frothy gains Monday as investors bet that data indicating the economy has been contracting since March of this year means a turnaround is on the horizon.
"It's been mostly a mixed day across the board," says Stephen Carl, principal and head of U.S. equity trading of Williams Capital Group. "Friday's gains seem to be holding for the most part."
The Dow Jones industrial average jumped 23.53 points, or 0.24%, to 9,983.24. The Dow is just shy of the key 10,000 level. The Nasdaq composite index jumped 38.11 points, or 2.00%, to 1,941.31. The broader Standard & Poor's 500 index rose 6.97 points, or 0.61%, to 1,157.31.
A National Bureau of Economic Research panel said that the United States is officially in recession. The call was no big surprise to Wall Street, but stocks still pulled back on the announcement earlier in the session. On the bright side, it could mean that the economic downturn could be over by July 2001.
Positive sentiment on the economy is on the rise. Many market watchers see a strong economic recovery next year on a quick end to the the war in Afghanistan, fiscal and monetary stimulus and falling oil prices.
Still, skeptics remain. J.P. Morgan chief equity strategist Doug Cliggott, who is among the bears, says that the recent stock market run up has been overdone. He recommends increasing positions in cash and bonds. Lehman Brothers said it is lowering exposure to technology stocks.
The latest weekly retail sales data, consumer confidence read and existing home sales are expected Tuesday. S&P's MMS expects a 3.9% drop in October to a 4.7 million unit pace for existing home sales. Already released housing market data is consistent with this outlook. Housing starts fell 1.3% while permits dropped 3.6% during the month.
The University of Michigan's confidence report of Nov. 21 has stolen some thunder from the Conference Board's upcoming release, but any further signs that confidence has stabilized from the the September 11 shock would be welcome.
Weekly retail sales data, also due Tuesday, will serve as a gauge of how consumer spending held up over Thanksgiving week (through Nov. 24) -- normally the busiest shopping period of the year.
For sure, some retailers could be in for a great holiday season. On Monday, Dow component Wal-Mart Stores (WMT ) reported a record single-day sales for a post-Thanksgiving Friday, of more than $1.25 billion.
News from Intel (INTC ) helped tech stocks. The No. 1 chipmaker says it has devised a new structure for transistors -- the tiny switches that make up semiconductors. The structure could lead to much faster and efficient chips.
U.S. Treasuries finished lower as stocks rallied late in Monday's session. For most of the day, Treasury notes climbed on the NBER's recession call and comments from market strategists that encouraged exposure to bonds.
Investors have a full slate of economic reports for the week. On Tuesday, traders will look at a report on existing home sales, weekly retail sales and consumer confidence via the Conference Board.
On Wednesday, the Fed's Beige Book will provide an update on the health of the U.S. economy. According to MMS, there should be some improvement from the poor profile of the previous report. Weekly initial jobless claims -- which are garnering an increasing amount of attention from the markets -- are due on Thursday, as is durable good orders. Revised third quarter GDP and the November report on the Chicago purchasing managers' index are due on Friday.
European markets finished mixed as gains in tech and media companies were offset by losses in oil concerns. However, enthusiasm for a U.S. economic turnaround is coming from lower oil prices, signs of a speedy end to the Afghan war, and solid consumer spending in the U.S.
In London, the Financial Times-Stock Exchange 100 index reversed course, ending higher by 9.30 points, or 0.18%, to 5,302.50. In France, the CAC 40 finished down 9.44 points, or 0.21%, to 4,564.38. In Germany, the DAX Index shed 36.85 points, or 0.72%, to 5,114.12, after sliding earlier on a report that the German economy shrank 0.1% in the third quarter.
In Asia, the markets finished higher. The Nikkei rallied 367.48 points, or 3.44%, to 11,064.30, marking a three-month high, as the country's bad bank loan problems showed signs of healing. High-tech names and automakers led the gains. In Hong Kong, the market gained 69.60 points, or 0.61%, to 11,399.96.