Updated from 4:03 p.m. EST
The major indices surged to new year highs Monday, as positive economic reports finally got the attention of traders at the start of what is traditionally a strong month for stocks.
Dow Jones Industrial Average
climbed 116.59 points, or 1.2%, to 9899.05, the
rose 11.92 points, or 1.1%, to 1070.12, and the
gained 29.56 points, or 1.5%, to 1989.82. The Dow and S&P 500 set new 18-month highs and the Nasdaq achieved a 22-month high, topping closing levels of early November.
Volume on the
New York Stock Exchange
was 1.35 billion shares, while 1.83 billion shares exchanged hands on the Nasdaq. Advancers outpaced decliners on the NYSE at nearly 3 to 1, and on the Nasdaq at close to 2 to 1.
American shoppers spent an estimated $7.2 billion on Black Friday, up 4.8% from last year, according to ShopperTrak. Not surprisingly,
led the way with a single-day record of $1.52 billion on Friday, up 6.3% from last year. Despite the news, Wal-Mart shares dipped $1.11, or 2%, to $54.53.
"It is clearly a case of buy on the rumor, sell on the news with the retailers," said Todd Leone, senior trader at SG Cowen. "There is also some concern about lower profit margins."
While the headline estimates from the nation's retailers were impressive, several retail analysts warned that the devil may be in the details.
"In general, what you saw selling was music, DVDs, software and other loss leaders" said Stacey Widlitz, retail analyst with Fulcrum Global Partners. "These are items that retailers sell at very low margins, or in some circumstances below cost, to get people into the store; Wal-Mart has been particularly aggressive in this area."
Widlitz also warned that early estimates are not always indicative of the entire holiday shopping season.
"Last year's Black Friday numbers were much better than the season turned out to be," added Widlitz. "These early sales are only 10% of total holiday sales, so it is far too early to call the entire season."
Pamela Nagler, retail analyst at Fulcrum, hit the malls on Friday to do some first-hand analysis of the American consumer. "There was definitely a lot of traffic in the stores, but I didn't see tremendous buying momentum at the cash registers," she said.
In her own fieldwork, Widlitz observed consumers purchasing a lot of smaller items, but thought sales of big-ticket items like digital cameras and flat-screen televisions were spotty.
After a strong opening, stocks got a second lift from another batch of stronger-than-expected economic data. The Institute for Supply Management's Manufacturing Index rose to 62.8 in November, from 57.0 last month. The market had expected a reading of 58.1. Moreover, the ISM's employment index showed growth for the first time in 38 months.
In addition, the government said construction spending rose by 0.9% in October, after a 1.3% increase in September; the consensus estimate was 0.6%.
"Many investors were away last week and were ready to buy this morning, after a strong showing last week and strong economic releases," added Leone. "ISM manufacturing was particularly encouraging, reaching its highest level since December 1983."
December is a traditionally strong month for stocks: Since 1950, it has been the best month for the S&P 500 and second-best for the Dow, according to the
Stock Traders Almanac
In the currency markets, the dollar strengthened against the euro and was slightly lower vs. the Japanese yen.
The 10-year Treasury bond fell 17/32, its yield rising to 4.4%.
Gold prices surged 1.6% to $404.40 an ounce, setting a new seven-year high, and crude oil futures fell 1.4% to $29.98 per barrel.
The Wall Street Journal
is reporting that President Bush is expected to end steel tariffs in order to avoid retaliatory measures from the European Union and others, and quell fears of a trade war that have been weighing on stocks, and especially the dollar.
In the day's top news, Phil Condit resigned as chairman and CEO of
, a week after the CFO was fired for offering a job to a government official with regulatory jurisdiction over the company. Boeing shares fell 37 cents, or 1%, to $38.02.
Vice Chairman Roy E. Disney resigned from the company's board and called for the resignation of Chief Executive Michael Eisner. Disney rose 8 cents, or 0.4%, to $23.17.
Drug stocks got a boost following a favorable story on
in this week's
, which said that the company's shares are trading at an attractive valuation along with the rest of the sector, and Pfizer's product pipeline is very impressive. The Amex Pharmaceutical index rose 1.8%, and Pfizer shares climbed 64 cents, or 1.9%, to $34.21.
said it will acquire
group life and accident, short-term and long-term disability, and other specialty businesses for $500 million in cash. The deal is seen closing by the end of 2003. Hartford Financial shares improved $1.26, or 2.3%, to $56.26, while CNA shares rose 11 cents, or 0.5%, to $23.50.
In earnings news, retailer
Jos. A. Bank
said third-quarter earnings were 38 cents a share, 2 cents a share better than analysts' consensus estimates and compared with 26 cents a share a year ago. Sales increased 24% to $72 million. The company's shares dipped $4.51, or 10.9%, to $36.70.
was upgraded to buy from hold at A.G. Edwards. GE shares improved 35 cents, or 1.2%, to $29.02.
Deutsche Bank reiterated its buy rating on
and raised its 52-week price target to $48 from $44. The broker expects the online-advertising market to grow 30% over the next two to four quarters. Yahoo! shares rose $1.22, or 2.8%, to $44.21.
Overseas markets finished up sharply. London's FTSE 100 rose 1.6% at 4410 and Germany's Xetra DAX gained 2% to 3821. In Asia, the Nikkei surged 3% to 10,403 and the Hang Seng improved 1.1% to 12,457.
Tomorrow's economic calendar is without any major reports.