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Stocks Gain in Hopes of Recovery

Wall St.: Major indexes end up at their highest levels since Sept. 11, but Dow fails to reach 10,000.

November 27, 2001|Reuters

The stock market continued its post-Sept. 11 recovery Monday as anticipation of an economic rebound next year took the sting out of word the United States has been mired in recession for most of 2001.

"The market is clearly looking forward on the assumption the economy [will rebound] in 2002," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. "But the near-term news still leaves a little to be desired. It's not the clearest picture of an oncoming bull market."

Besides placing bets on an economic recovery, investors also got a lift Monday from news of more progress in the U.S.-led military campaign in Afghanistan.

All three major stock indexes ended the day at their highest levels since Sept. 11. The tech-laden Nasdaq composite index climbed 38.03 points, or 2%, to 1,941.23. The blue-chip Dow Jones industrial average rose 23.04 points, or 0.2%, to 9,982.75, inching closer to the key 10,000-point level. The broad Standard & Poor's 500 index gained 7.08 points, or 0.6%, to 1,157.42.

Winners edged losers 16 to 15 on the New York Stock Exchange and 7 to 5 on Nasdaq in moderate trading.

The Nasdaq has surged more than 36% since its late-September lows, while the Dow has rallied more than 21% and the S&P 500 has climbed almost 20%. Rapid-fire gains in the market have left many investors wondering whether stocks are due for a pullback.

"It's very possible things are getting a little too far ahead," said Edgar Peters, chief investment officer at PanAgora Asset Management Inc. "We have come an awful long way in a very short period."

The official declaration of a recession Monday by a panel of economists that dates U.S. business cycles could add urgency to Washington's debate over a stimulus package to help boost the economy, analysts said. The National Bureau of Economic Research said the economy has been in a recession since March, snapping a 10-year expansion.

At least one of the six members on the panel suggested an economic recovery was possible by mid-2002. But Robert Baur, head of trading at Invista Capital Management, said "the market has already priced in a recession." In other words, stock prices already may reflect the effect of an improved economy, limiting their upside if the economy does recover in 2002.

Bond investors also are betting on economic recovery, driving yields on Treasury securities higher Monday in the expectation that the Federal Reserve is through cutting interest rates. The yield on the two-year Treasury note rose to 3.17% from Friday's close of 3.16%, and the yield on the benchmark 10-year T-note rose to 5.01% from 5% on Friday, extending the two-week rise in yields.

Among Monday's highlights:

* Shares of online retailers continued their recent rise on optimism they will enjoy strong holiday sales. Amazon.com gained $3.13 to $12.21, Yahoo rose $2.34 to $18.07, and online auctioneer EBay climbed $3.61 to $65.16. The Interactive Week index of Internet stocks rose 3.3%.

* Intel rose 81 cents to $31.87, hitting its highest level since early August. The chip giant devised a new structure for transistors, the tiny switches that make up semiconductors. Other chip companies, such as Broadcom, up $3.54 to $49.99, also gained. The Philadelphia Stock Exchange semiconductor index rose 4.1% and is up about 40% since Sept. 11.

* Home Depot was a drag on the Dow, falling $1.06 to $45.52. The drop came after the Wall Street Journal said the home improvement retailer will disappoint investors this week with a warning of slower growth.

* Exxon Mobil, another Dow component, fell 67 cents to $37.77. Oil prices slipped as there were no signs a production squabble between OPEC and Russia would be resolved soon. Other oil stocks also fell, ChevronTexaco losing $1.38 to $85.20 and Schlumberger slipping $1.18 to $46.30.

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