Dow, Nasdaq Rally Closer to Thresholds

The Dow 10,000 and Nasdaq 2,000 thresholds drew nearer Monday as the stock market rallied amid more encouraging data on the economy.

In other trading, the dollar surged, bond yields rose and gold fell.

Strong reports on manufacturing and construction buoyed investor hopes for robust corporate earnings growth in 2004 and drove the Dow Jones industrial average up 57.34 points, or 0.6%, to 9,858.46. That was the best close since May 2002.

The technology-dominated Nasdaq composite index gained 35.49 points, or 1.8%, to 1,967.70, its highest close in nearly 22 months.

With another session like Monday’s, Nasdaq would top the 2,000 mark for the first time since January 2002.

Some analysts say that if the market can rally above Dow 10,000 and Nasdaq 2,000, the effect could be to cement the view that a new bull market is underway and draw more investors in from the sidelines.

“What’s carrying it forward now is that both the Dow and Nasdaq are coming close to round numbers, which to me means nothing, technically, but which psychologically can be quite encouraging for investors,” said Ned Riley, chief investment strategist at State Street Global Advisors in Boston.

The Dow is up 18.2% year to date. Nasdaq has shot up 47.3%.

Most other broad market indexes also rose to at least 52-week highs Monday. The Standard & Poor’s 500 jumped 8.30 points, or 0.8%, to 1,059.02.

S&P;’s index of 600 smaller stocks hit a record high, rising 5.02 points, or 2%, to 261.43 -- surpassing its previous record close of 257.81 set April 16, 2002. The index is up 33% this year.

Winners topped losers by 23 to 10 on the New York Stock Exchange and by 2 to 1 on Nasdaq. Volume was moderate.

“We can’t see the end of this rally,” Milton Ezrati, economic strategist at Lord Abbett & Co., told Bloomberg News. “We do think the economic recovery has legs. Profits will follow, and the market will move in tandem with the earnings.”

In a sign that companies increasingly are more confident about profit growth, S&P; reported Monday that 159 companies raised their cash dividend payments in October, up from 118 a year earlier.

The Institute for Supply Management on Monday said its index of manufacturing activity rose to 57 last month from 53.7 in September. Any reading above 50 indicates expansion.

Also, a government report showed that construction spending reached a record high in September, underscoring housing’s role in the recovery.

The economic data helped boost the dollar, which rose to its highest levels in a month against the yen and the euro. The dollar closed at 111.26 yen in New York, up from 110 on Friday. The euro fell to $1.146 from $1.157.

Gold prices slumped as the dollar gained. A stronger buck makes gold more expensive for foreign buyers because the metal is priced worldwide in dollars.

Near-term gold futures in New York lost $7.50 to $377 an ounce. The price hit a seven-year high of $388.90 on Oct. 24.

As usual, the fresh signs of an accelerating economy were poorly received by Treasury bond investors, who fear that a rebound in business activity will hasten the day the Federal Reserve begins to tighten credit.

The yield on the benchmark 10-year T-note rose to 4.34% from 4.29% Friday. The yield has risen from 3.94% on Oct. 1.

“The recovery story is gaining ground, and it’s certainly bearish for bonds,” Ralph Axel, a U.S. government debt strategist at HSBC Securities USA in New York, told Bloomberg News.

A key report on the economy will be delivered Friday, when the Labor Department reports on October employment trends.

Among Monday’s highlights:

* Semiconductor stocks zoomed anew after the Semiconductor Industry Assn. said global chip sales in September had the biggest percentage increase since 1990 on demand for computers and cellular phones.

Intel jumped $1.09 to $34.04, PMC-Sierra rallied $1.82 to $19.99 and Broadcom was up $1.72 to $33.66.

* Internet-related stocks were strong. Amazon.com rose $2.31 to $56.74, and InfoSpace rose $1.25 to $27.30.

* Trucking and railroad stocks got a lift as investors bet on an expanding economy in 2004. Union Pacific was up $1.15 to $63.75, and Yellow gained $1.07 to $33.94.

* Real estate investment trusts attracted buyers after a recent pullback. Essex Property rose $1.44 to $61.32, and Vornado Realty rallied 95 cents to $51.50. The Bloomberg index of 134 REIT shares is up 22% this year.

* Brokerage stocks rode the market higher. Morgan Stanley gained $1.30 to $56.17, and Lehman Bros. rose $2.05 to $74.05.

* On the downside, HMO firm First Health sank $6.02 to $18.45 after warning that earnings growth would stall in 2004. The news hurt other HMO stocks, including Coventry Health, which lost $1.11 to $53.64, and Aetna, which slid $1.42 to $55.99.

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Market Roundup, C8-9