Updated from 4:03 p.m. ESTStocks finished modestly higher Monday afternoon, with the Nasdaq setting a new 30-month closing high as investors grew optimistic ahead of major earnings reports from the technology sector due out later in the week. The Dow rose 26.29 points, or 0.3%, to 10,485.18; the S&P 500 improved 5.37 points, or 0.5%, to 1127.23; and the Nasdaq climbed 24.86 points, or 1.2%, to 2111.78, after the three major indices sold off Friday on the heels of a weak employment report. Volume on the New York Stock Exchange was 1.43 billion shares, while 2.21 billion shares changed hands on the Nasdaq. Advances beat decliners by about 3 to 2 on both exchanges. "I think the upcoming earnings reports are encouraging investors," said Robert Basel, co-head of equity trading at Citigroup. In addition, "as investors analyze Friday's employment report from a longer-term perspective, they like what it means for the rate outlook."
Other MarketsMarkets overseas finished lower. London's FTSE 100 was off 0.4% at 4450, while Germany's Xetra DAX was down 0.5% at 3996. In Asia, Hong Kong's Hang Seng finished down 0.3% to 13,352. Japan's Nikkei is closed for a holiday. Meanwhile, the 10-year Treasury note fell 2/32, yielding 4.09%. The dollar was stronger vs. the Japanese yen and the euro, which recently touched $1.2746 vs. the U.S. currency. The euro weakened after European Central Bank President Jean-Claude Trichet expressed concern over the currency's rapid appreciation.
Irrational Exuberance?Stocks finished well into the black Monday, showing resilience in the wake of large losses triggered by a dramatically disappointing labor report. The Dow and S&P 500 have now finished higher for the past seven consecutive weeks, barely missing a beat after a report Friday showed the U.S. economy added only 1,000 jobs in December. Although stocks did sell off on Friday, the pullback seemed mild compared to the degree of the downside miss, and the initial reaction was far from dramatic, with the Nasdaq actually trading higher for a good portion of the day. Are the markets displaying a touch of "irrational exuberance," to borrow the term coined by Federal Reserve Chairman Alan Greenspan in 1996? Several strategists say no, but warn that a mild correction is possible. Still, most expect stocks to continue their march higher. "There is no question that some stocks are priced for perfection, but the markets are still in the process of discounting a good economy and growing earnings," said Peter Cardillo, chief strategist at Global Partners Securities. "Growth in the economy should give enough impetus for the market to move higher" over the next couple of quarters. Michelle Clayman, chief investor officer at New Amsterdam Partners, isn't concerned either. "We think at these levels, the market is probably around fair value. We are not very worried; the S&P 500 is currently trading at around 17 times 2004 earnings," which she feels is reasonable. Both Clayman and Cardillo said there is a chance of an interim correction, but feel that any pullback would be mild. "There certainly will not be a sharp correction, barring any dramatic surprises on the economic or global front," said Clayman.