Stocks Post Big Gains

A big jump in consumer confidence signals a healthier outlook for the economy. But what does it mean for future Fed moves?

Bolstered by an unexpected rebound in consumer confidence, which tamed concerns the nation's economy will tumble into a recession, stocks reversed course Tuesday to close solidly higher.

The Conference board's broad barometer of consumer confidence rose to 117.0 in March from a upwardly-revised February reading of 109.2, way off Wall Street expectations for a drop to 104.5. The rise ends five straight months of declines in the measure of future spending.

The unexpected economic data offered a two-edged sword for stocks, according to Standard & Poor's economic research unit. While the data suggested a healthier outlook for the economy, it also hinted at less aggressive rate cuts, which help spur consumer and corporate spending.

Earlier in the session, Greenspan spoke on "Monetary Policy for a Growing Economy" before a National Association for Business Economics conference. But the Fed chief dropped no hints about future interest rates. The Fed's next policy-setting meeting is slated for May 15.

In corporate news, Johnson & Johnson (JNJ ) has agreed to buy Alza Corp. (AZA ) for $10.5 billion in stock, the companies said on Tuesday. The deal is expected to strengthen J&J's drug pipeline and give it technology for delivering medicines in new ways. Shares of Johnson & Johnson finished higher, while Alza stock slipped.

Overall, investors have begun speculating whether the market could be on the road to recovery after months of selling that has hurt the tech-led Nasdaq and the broader S&P 500 indexes into bear market territory. Even the blue-chip-heavy Dow briefly dipped into bear territory last week before recovering. Tuesday's strong finish for the Dow marks the third, consecutive rally for old economy names.

Looking ahead, Bruce Bent, president of Reserve Funds, told Standard & Poor's research unit that until the third quarter, the market should provide investors with an opportunity to purge their portfolios. Additionally, cautious analyst recommendations will likely lead to more market sell-offs in the second quarter, Bent added.

The Dow closed up 260.01 points, or 2.68%, to 9,947.54. Among the Dow leaders were Home Depot Inc. (HD ), Honeywell International Inc. (HON ) and Merck & Co. Inc. (MRK ). Dow component SBC Communications Inc. (SBC ) also ended higher.

Led by semiconductor stocks, the Nasdaq, meanwhile, finished higher by 53.74 points, or 2.80%, to 1,972.33. And the broader S&P 500 added 29.49 points, or 2.56%, to 1,182.18. Tech and telecom stocks led the "500," along with transportation, which has jumped 5.6% in the last three sessions.

Treasury Market

Treasuries finished lower, amid strength in equities. In other economic news, the Commerce Department reported new orders for costly U.S. manufactured goods fell modestly in February after a steep decline the previous month. The report confirms what many have already figured out -- the economy is slowing.

Stocks in the News

Kellogg Co. (K ) on Monday said it has completed its purchase of No. 2 U.S. cookie and cracker maker Keebler Foods Inc. (KBL ). The deal gives the cereal giant a major boost in its move to expand in the fast-growing snack food business: Reuters.

Semiconductor maker TranSwitch Corp. (TXCC ) cut its revenue and earnings outlook again due to poor North American business.

Shoe marketer Stride Rite Corp. (SRR ) on Monday said 2001 profits were likely to be up between 10% and 12%, on strong growth in its children's business.

World Markets

European stocks closed higher, responding to strength in the U.S. markets. In London, the Financial Times-Stock Exchange 100 index closed up 151.50 points, or 2.72%, to 5,728.10. In Germany, the DAX Index gained 211.24 points, or 3.69%, to 5,938.21. In France, the CAC 40 added 110.80 points, or 2.16%, to 5,235.60.

In Asia, the markets finished sharply lower. The Nikkei lost 223.98 points, or 1.62%, to 13,638.33. In Hong Kong, the Hang Seng ended off 242.59 points, or 1.87%, to 12,707.90.

By Heesun Wee in New York