Late Rally Lifts Blue Chips

Updated from 4:04 p.m. EDT

Blue-chip stocks staged a late-day rally Tuesday as positive corporate news and strength in commodity and cyclical stocks helped the market defy $50-a-barrel oil and a disappointing survey on consumer confidence.

The Dow Jones Industrial Average climbed 88.86, or 0.89%, to 10,077.40 after closing below 10,000 Monday for the first time since Aug. 17. The S&P 500 rose 6.54 points, or 0.59%, to 1110.06, while the Nasdaq added 9099 points, or 0.54%, at 1869.87.

Elsewhere, the 10-year Treasury note fell 5/32 to yield 4.01%, while the dollar was down against the euro and up against the yen. Gold was higher.

Volume was relatively moderate on the New York Stock Exchange, where 1.4 billion shares traded hands and advancers beat decliners 2 to 1. On the Nasdaq, 1.5 billion shares changed hands with advancers ahead of decliners by a 3 to 2 ratio.

The industrials climbed back in the afternoon as Alcoa (AA - Cramer's Take - Stockpickr) gained 4.3% in a broader rally that included copper miners, steel makers and gold companies. The rally in commodity companies followed higher commodity prices as well as news that Chinese demand for such raw materials was still growing.

Blue chips also gained support from cyclical stocks. Shares of Caterpillar (CAT - Cramer's Take - Stockpickr) jumped nearly $2.48, or 3.3%, to $76.90. The heavy-equipment maker raised its 2004 revenue forecast citing strong demand. Meanwhile, shares of 3M (MMM - Cramer's Take - Stockpickr) also rose 1.78%.

"It is rather impressive to see the market gaining back some of yesterday's loss, with oil having broken $50 and not having backed off very much," said Barry Hyman, equity market strategist at Ehrenkrantz King Nussbaum.

He acknowledged that "end-of-the-quarter window-dressing" might be contributing to Tuesday's upward move, but said the market's ability to shake off negativity is noteworthy.

"I think the market holds up extremely well given oil at these levels," Hyman added. The strength is in "companies with pricing power, while commoditized sectors and companies with little pricing power and deceleration in growth are exhibiting weakness."