Call it "revenge of the industrials." While the bulk of technology shares were given the shaft again, on the
New York Stock Exchange, industrial stocks ranging from AA (
) to Z (
) benefited from a resurgent interest cyclical and industrial stocks.
The renewed eye toward industrial blue-chips sparked a 245-point rally in the
Dow Jones Industrial Average, led by Alcoa, rising 13%, along with strong buying in financial stocks, transports, retail, defensive names like tobacco and recently battered
(up 5.2% today).
dropped $2.63 to $48.06, the lowest close for the stock since last December, after
reduced its price target to $60 from $65. Networking stocks and fiber-optical names, until recently the market's high-flyers, again met with selling pressure as investors continue to avoid these stocks.
Investors and strategists termed the rebound in the industrial stocks as a desire by investors to buy up stocks that had taken on attractive valuations in the last several weeks, and especially after the Dow dropped to 9975 on October 18. Since then, the Dow has gained 860 points in just eight sessions, including last Wednesday's 60-point drop.
"We're seeing a pop from there," said Matt McDermott, trader at
. "People are concerned about growth from the large-cap technology area, and they're going into the beaten-down sectors."
Today's catalysts were comments from Lehman Brothers' global strategists, which increased their weighting in cyclical stocks at the expense of financial names (which also rallied today), and the analysts at
Deutsche Banc Alex. Brown
, which upgraded the paper stocks.
The Morgan Stanley Cyclical Index gained 5.9% today, and among the day's biggest percentage gainers were, for Pete's sake,
, gaining 13%, and
, which rose 13% despite reporting sinking profits due to higher energy costs.
"Industrial cyclicals had been beaten so badly, they stopped going down when they came out with negative news," said Chuck Carlson, co-manager of the
Strong Dow 30 Value Fund
. "There's still an unwillingness of investors to move to cash, and they feel a little safer putting it into these stocks."
Paper stocks enjoyed one of the more impressive rallies of the day.
, which was upgraded by Deutsche, gained $2.75 to $36, an 8.3% gain, and
, also upgraded, rose $5.44 to $54.38.
What's interesting about the sharp rally in these names is that it comes at a time when most analysts view the economic picture as changing toward a period of slower, albeit still strong, growth. The market's view has become increasingly pessimistic in the last few weeks, but opinions are likely skewed by the terrible performance in technology stocks throughout the month of October.
Investors continue to frown on technology shares due to the assumption that those high-growth stocks were overvalued. It doesn't necessarily reflect a perception that the economy is headed into recession. The recent performance in the cyclicals illustrates this. If the economy is slowing, however, some investors aren't sure industrial stocks will be able to extend this rally.
"I'm somewhat perplexed," said Allan Meyers, portfolio manager of the
Kent Large Company Growth Fund
in Grand Rapids, Mich. "But maybe the stuff has just gotten whacked. People are just saying, 'Let's buy 'em here.'"
Traditional defensive names are expected to continue to do well. They did well today, for sure. The
Dow Jones Utility Average
, which since March has been the true go-go momentum sector, was up again today, gaining 2.6% to finish at 392.06. The pharmaceutical stocks were marginally higher, and the
S&P Insurance Index
gained 4.8% to finish at a new all-time closing high.
Investors also view some of technology's stalwarts as stocks that can handle the pressure of a slowing environment. Between March and a few week ago,
stock price had been more than halved, dropping from a high of $114.88 to $50.38. Today the stock was up again, along with familiar names like
, gaining 5%,
, up 3%, and
, which rose 2.9%.
The rise in those stocks, and some of the older technology sectors like PC makers and semiconductor makers while networking stocks collapse illustrates the rotation away from speculative growth stocks into what investors can now safely term "value" technology stocks.
"That's probably not a bad deal," said Meyers, thinking about Microsoft. "People are just buying more quality tech."
Breadth was strong on decent volume on the Big Board; lousy on the Nasdaq, but volume was strong.
New York Stock Exchange: 1,870 advancers, 1,012 decliners, 1.17 billion shares. 98 new 52-week highs, 59 new lows.
Nasdaq Stock Market: 1,764 advancers, 2,229 decliners, 1.7 billion shares. 58 new highs, 157 new lows.
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Most Active Stocks
NYSE Most Actives
- Nortel Networks (NT) : 46 million shares.
AT&T (T) - Get AT&T Inc. Report: 27 million shares.
Lucent (LU) : 20 million shares.
Nasdaq Most Actives
- Cisco: 109.8 million shares.
Microsoft: 54.3 million shares.
Intel: 47.9 million shares.
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There was good cheer to be had from a good lot of market sectors today. Retail stocks gained sharply, rising on strong gains in recently maligned department stores.
Federated Department Stores
rose 7.5% and
rose 5.9%, helping lift the
S&P Retail Index
to a 3.4% gain.
Similarly reclaimed were tobacco stocks. The
S&P Tobacco Index
rose 3.7%, led by Dow component
, which rose 3.4% to $37.94, reaching a new 52-week high.
American Stock Exchange Airline Index
shot up 7%, while the
Dow Jones Transportation Average
gained 6.2%. The component helping both was
Delta Air Lines
, which is reportedly in talks with
to join their international alliance. Delta gained 10.3% today.
, meanwhile, rose $1.88 to $28.81, reaching a new 52-week high.
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Bonds were barely changed today, ignoring the morning's stronger-than-expected economic data.
The benchmark 10-year
Treasury note is at 100 3/32, down 2/32, to yield 5.736%.
Treasury bond ended down 6/32 to 106 31/32, yielding 5.756%.
Personal income and consumption
) for September were both higher. Personal income rose 1.1%, ahead of forecasts of a 0.4% rise and above the prior month's increase of 0.4%. Personal consumption rose 0.8%, beating forecasts of 0.6% increase.
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European markets ended the day slightly higher.
in London ended up 21.9 to 6388.
in Paris finished slightly higher, up 27.91 to 6296.84, while the
in Frankfurt ended up 1.89 to 6926.57.
After economic data on Friday showed a slowing U.S. economy, the
battered euro was climbing. It was lately at $0.8405.
Big Asian technology and telecommunications shares started the week with a limp, taking the region's
equity markets to a lower close Monday.
In Tokyo, the
closed down 117.6 points, or 0.8%, at 14,464.6.
In Tokyo trading, the dollar traded up 0.33 yen to 108.70 yen. The greenback was lately at 108.91.
index fell 102.6, or 0.7%, to 14,799.9, as
fell HK$1.75, or 3.3%, to 51.00 ($6.54) and
fell HK$0.50, or 0.5%, to 107.00.
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