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Dow Flirts With History

Robert Holmes

The Dow Jones Industrial Average made another push toward a new high Tuesday after a positive reading on consumer confidence outweighed a series of profit warnings from corporate America.

By the close of trading, the Dow had added 93.58 points, or 0.81%, to 11,669.39, its second-highest close ever and putting it within about 54 points of its January 2000 record. The S&P 500 was higher by 9.97 points, or 0.75%, at 1336.34, a fresh five-and-a-half-year best, and the Nasdaq Composite was up by 12.27 points, or 0.55%, at 2261.34.

"Today's action shows a painting of the tape for quarter-end," said Jay Suskind, head of institutional equity trading with Ryan Beck. "We're betting on oil prices being the offset to the slowdown in housing. There are more economic numbers due this week that can show some moderation and push us up. However, next week will be an entirely different story."

Though September is historically a weak month for the major indices, the Dow is higher by 288 points, or 2.5%, with only three sessions left before the end of the month. The S&P 500 has gained 33 points, or 2.5%, and the Nasdaq has tacked on 77 points, or 3.5%.

"We're approaching the end of the quarter, so we may continue to see window-dressing," said Peter Cardillo, chief market analyst with S.W. Bach & Co. "We have falling oil prices and the perception of the economy slowing, and inflation expectations are embedded in the market. Hopefully we'll remain in positive territory."

To view Gregg Greenberg's video take on today's market, click here.

The Nasdaq's advance was restrained by a loss of 5.2% in Autodesk (ADSK - Cramer's Take - Stockpickr).

Meanwhile, the Dow benefited from gains of 2.4% or more in General Motors(GM - Cramer's Take - Stockpickr), Caterpillar(CAT - Cramer's Take - Stockpickr), Disney(DIS - Cramer's Take - Stockpickr) and Intel(INTC - Cramer's Take - Stockpickr)

About 2.23 billion shares changed hands on the New York Stock Exchange. Advancers beat decliners by a 2-to-1 margin. Volume on the Nasdaq was 2.06 billion shares, with winners outpacing losers 8 to 7.

The major indices jumped after the Conference Board said its consumer confidence index rose to a reading of 104.5 in September from a revised 100.2 the previous month. Economists anticipated the confidence index would reach 103.

Ian Shepherdson, chief economist with High Frequency Economics, said he expects that "both expectations and current conditions will likely rise again in October as gas prices are still falling. But this is a temporary boost, not a trend reversal."

Following the data, bond prices were reversing the prior session's rise. The benchmark 10-year Treasury note was down 10/32 in price, yielding 4.58%. The dollar strengthened against the euro and the Japanese yen.

Crude prices eased by 44 cents to $61.01 a barrel. Precious metals were higher, with gold up $1.20 to close at $597.10 an ounce and silver stronger by 17 cents at $11.50 an ounce.

Back on the corporate side, traders were taking in stride a series of lowered estimates as the quarter draws to an end.

To view Gregg Greenberg's video take on today's market, click here.

After the close Monday, Lowe's (LOW - Cramer's Take - Stockpickr) cautioned investors about its earnings again. The seller of home-improvement goods, citing weaker-than-expected sales and a cautious consumer outlook, said full-year earnings will probably be near the low end of its earlier guidance. Still, Lowe's was higher by a penny to finish at $28.85.

"So far, we haven't had any major bombshells from earnings preannouncements," Cardillo said. "We should still expect another quarter of positive earnings, possibly in the [double-digit growth] again. We should hopefully see sentiment improve further."

Joining Lowe's in taking its estimates down were Advanced Medical Optics (EYE - Cramer's Take - Stockpickr), PMC-Sierra (PMCS - Cramer's Take - Stockpickr) and Avid Technology (AVID - Cramer's Take - Stockpickr). UBS cut its stock price target for each of the three companies after the estimate reductions.

Next up was Lennar (LEN - Cramer's Take - Stockpickr), whose management cut earnings guidance for the second time this month, saying "it is not clear that the homebuilding downturn has yet found a floor." Lennar tacked on 7 cents, or 0.2%, to $46.95.

A number of indicators have lately shown that the robust housing market is dealing with a slowdown in what had been a torrid pace of buying and selling. On Monday, the National Association of Realtors said last month's existing-home sales fell 0.5% from July to 6.3 million annualized units. August's sales of previously owned houses dropped 12.6% year over year.

By subgroup, the Philadelphia Housing Sector index ended higher by 1.7%, with 19 of its 20 components closing with gains. Elsewhere, the Dow Jones Transportation Average added 2.5%, the Amex Oil Index gained 2.1%, and the Philadelphia Semiconductor Sector index was down 0.3%.

To view Gregg Greenberg's video take on today's market, click here.

Retailers faced pressure after Credit Suisse downgraded Kohl's(KSS - Cramer's Take - Stockpickr) and Nordstrom(JWN - Cramer's Take - Stockpickr) to neutral from outperform. The firm also cut its rating on J.C. Penney(JCP - Cramer's Take - Stockpickr) to underperform from neutral.

Kohl's lost 1.7%, Nordstrom closed down 1.1%, and J.C. Penney fell by 0.6%. The S&P Retail index finished unchanged.

Meanwhile, Jefferies initiated coverage of Cisco(CSCO - Cramer's Take - Stockpickr) with a buy rating and a stock price target of $30. Cisco gained 27 cents, or 1.2%, to close at $23.50.

Overseas, Europe's equities powered higher. London's FTSE 100 added 1.3% to 5873, and Frankfurt's Xetra DAX rose 1% to 5960. Asia's shares slipped, with Tokyo's Nikkei giving back 0.5% to 15,557 and Hong Kong's Hang Seng closing down 1.4% at 17,308.