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Updated from 4:05 p.m. EST

Stocks finished sharply higher Monday afternoon as the traditional Santa Claus rally continued into the last trading week of the year with the

Nasdaq Composite

closing above the 2000 mark for the first time since January 2001.



added 125.33 points, or 1.2%, to 10,450.00, a 21-month closing high; the

S&P 500

rose 13.59 points, or 1.2%, to 1109.47, a 20-month high; and the Nasdaq gained 33.34 points, or 1.7%, to 2006.48, a 23-month high.

Volume was very light as the holiday trading pattern continues; 1.06 billion shares traded on the

New York Stock Exchange

, while 1.40 billion shares changed hands on the Nasdaq. Advancers beat decliners by more than 3 to 1 on the NYSE and by about 7 to 3 on the Nasdaq.

Ken Tower, chief market strategist at CyberTrader, attributed today's strength to the "Santa Claus bounce, the fact that it is the first day back for a lot of people and a general recognition that money is still coming into the market."

The economic calendar is light Monday, with the only item of note being the Conference Board's help-wanted index, which improved to 39 in November from 37 in the previous month. Economists expected a smaller increase to 38.

Japanese officials also say it's too early to lift a ban on U.S. beef that was imposed in the wake of last week's detection of mad cow disease in the Pacific Northwest. U.S. agricultural officials continue to struggle with efforts to recall meat taken from the cow's herd, which is now thought to have originated in Canada. According to reports, the infected cow was slaughtered on Dec. 9 with 20 other cattle at a meatpacking plant in Washington state. Its beef was distributed to retailers in Alaska, California, Guam, Hawaii, Idaho, Montana, Nevada, Oregon and Washington state.

Investigators fear that much of the meat from the cattle slaughtered at the plant that day has already been consumed.

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Fashionably Late

The Nasdaq finally joined the holiday party, after lagging the other major averages through much of December, as investors shifted out of high-flying technology and small-cap stocks and into more stable sectors like cyclicals and energy.

"Anecdotal evidence, mostly from tax professionals, suggests that much of the Nasdaq underperformance was related to tax-loss selling," and not a true shift in leadership, said Tower. "In our experience, leadership rarely changes smoothly. It's much more common for leadership to change during a market correction."

The January Effect has apparently come early this year, as many anticipate investors will repurchase their winners sold to offset losses from prior years. The Composite has regained all of its ground since its Dec. low and is up nearly 1% for the month, but it is still trailing the Dow, which is up almost 6%.

However, some of the Nasdaq's biggest names have seriously lagged, even during the index's recent upturn and could play some serious catch-up in the coming year. For example,


(INTC) - Get Intel Corporation Report

shares are still down more than 6% on the month, but its prospects look bright according to Sanford Bernstein, who highlighted the company in a report today that boosted its 2004 forecasts for the industry.


(MSFT) - Get Microsoft Corporation Report

may also be poised to outperform; it is up only about 6%, despite about a 45% surge for the Nasdaq. J.P. Morgan recently initiated coverage of the company with an overweight; the brokerage believes new products and increased focus on small business will help boost revenue in 2004. Microsoft's year could well determine if stocks build on 2003's strength.

"The big question in terms of market averages is Microsoft," said Tower. "If Microsoft can rebound, it will have a big effect on both the Dow and the Nasdaq."

Other Markets

Overseas markets finished higher, with London's FTSE 100 up 0.3% to 4458 and Germany's Xetra DAX higher by 1.3% to 3953. In Asia, Japan's Nikkei closed up 0.8% to 10,501, while Hong Kong's Hang Seng added 0.1% to 12,464.

Currencies continued to be a major financial story Monday. The dollar hit another record low against the euro. One euro was recently buying $1.2484 compared with $1.2429 Friday, earlier breaching the $1.25 level for the first time ever. Elsewhere, one dollar was recently fetching 106.12 yen, compared with 107.43 in New York late Friday. The yen's strength was being attributed to comments from a Japanese finance official who said bad loans at the nation's banks were being reduced faster than it expected.

The 10-year Treasury bond fell 23/32, its yield rising to 4.24%. Bond volumes are likely to be extremely light this week, with few market-moving economic releases and limited trading hours. The market closes at 2 p.m. EST on Wednesday and Friday, and is closed entirely on Thursday.


Despite mad cow fears,


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was up 51 cents, or 2.1%, to $24.60, after its shares were upgraded to overweight from underweight by J.P. Morgan. The brokerage believes there won't be much consumer reaction to the mad cow scare and says the fast-food chain could benefit from lower beef prices.



(WEN) - Get Wendy's Company Report

said "there has been no impact on Wendy's recent sales trend over the past three days (Friday through Sunday)." The company's shares advanced 56 cents, or 1.5%, to $38.55.

Smith Barney boosted its forecast for the worldwide chip industry in 2004. The firm now says it expects 20% growth, up from 14% growth. The broker says rising demand, higher prices and inventory restocking will support the industry next year. The firm continues to favor


(INTC) - Get Intel Corporation Report


Cypress Semiconductor

(CY) - Get Cypress Semiconductor Corporation Report


Fairchild Semiconductor


. Shares of Intel advanced 79 cents, or 2.5%, to $32.15.

Sanford Bernstein lifted its forecast for

Advanced Micro Devices

(AMD) - Get Advanced Micro Devices, Inc. Report

, citing strength in its PC processor and flash memory businesses. The broker upped its estimate for fourth-quarter earnings to 7 cents a share from 1 cent a share, and for full-year 2004 to 40 cents a share from 22 cents a share. Both are above consensus forecasts of 3 cents and 26 cents a share for the fourth quarter and 2004, respectively. AMD gained 58 cents, or 4%, to $15.28.

Tomorrow, the Chicago Purchasing Manager's Index is released and is expected to fall slightly to 62.0 in December from 64.1 last month. Elsewhere, the Conference Board's consumer confidence index is expected to improve slightly to 91.8 from 91.7. In addition, existing home sales are expected to slip slightly to 6.33 million units in November from 6.35 million in the previous month.