Stocks jump on energy's rise, dollar's fall

The Dow closes up 132 points after Australia raises interest rates, a signal the worst of the slump is over.

By Charley Blaine Oct 6, 2009 7:00PM

Charley BlaineUpdated: 7:22 p.m. ET

 

Weren't stocks supposed to be falling this week?

 

That was the conventional wisdom when stocks ended last week lower for a second consecutive sweek.

 

But waves of selling haven't hit the market this week.  The Dow Jones industrials ($INDU) finished up 132 points, or 1.4%, to 9,731 today, the second 100-point gain in a row for the blue chips.

The Standard & Poor's 500 Index ($INX) was up 14 points, or 1.4%, to 1,055, and the Nasdaq Composite Index ($COMPX) was up 35 points, or 1.7%, to 2,104.

 

The bullish finish puts the Dow within 270 points of 10,000, a level not seen since Oct. 3, 2008.

 

Bulls looking for ammunition to say that the rally since March is alive and well got new evidence: Today's gain put the S&P 500 above its 10-day moving average for the first time in five days. As the market has moved higher, the index has tracked the 10-day average.

 

And the market has decent momentum going into Wednesday. One reason: Better-than-expected earnings from restaurant operator Yum Brands (YUM) sent shares up 1.1% to $35.24 after hours. The shares had been little changed at $34.86 in regular trading. Yum Brands operates the KFC, Pizza Hut and Taco Bell chains.

 

Futures trading also suggests U.S. stocks will open up slightly.

 

Fueling today's rally was gold's move to a new intraday high of $1,045 an ounce and a record close of $1,039.70 an ounce, up 2.2% on the day.

 

Gold jumped -- and the U.S. dollar dropped 0.6% against the euro and nearly 0.9% against the yen -- on a report in The Independent newspaper in England that a number of countries were trying to separate the global price of oil from the dollar.

 

Also, Australia's Reserve Bank, its version of the Federal Reserve, boosted its key rate to 3.25% from 3%.

 

Crude oil moved up to $70.88 a barrel, up 47 cents from Monday.

 

The rally came as plenty of analysts and economists have been calling for financial stocks, the source of the 2008 market crash, to collapse and take the entire market down with them.

 

Today's negative voices included Christer Whalen of Institutional Risk Analytics, a frequent critic of all the efforts to prop up the banking system. Whalen said today the fourth quarter for bank stocks will be a bloodbath.

 

Then, fund manager BlackRock warned for a pullback now that the S&P 500 is up nearly 17% on the year. But the firm was bullish about stocks in the long run, predicting 6% to 8% annual gains over the next several years.

 

Energy prices -- New York close
  Tues. Mon. Month chg. YTD chg.
Crude oil  $70.88 $70.41 0.38% 58.92%
(per barrel)
Heating oil $1.8142 $1.7916 1.46% 29.06%
(per gallon)
Natural gas  $4.8800 $4.9870 1.27% -13.20%
(per mil. BTY)
Unleaded gasoline $1.7727 $1.7539 3.42% 75.83%
(per gallon)
Retail gasoline $2.4610 $2.4610 -0.73% 52.19%
(per gallon; AAA)

 

But traders didn't seem interested.

 

What they were interested in was Reserve Bank of Australia's interest-rate increase.

 

This was the first big central bank to boost rates since the global financial crisis erupted.

 

The bank moved its rate higher because it believes Australia's economy has seen and weathered the worst of the global financial crisis. And the bank thinks the global economic recovery has begun.

 

What makes Australia different from the United States (aside from population size) is that much of its economy is built on natural resources and agriculture. And its banking system never developed the flaws that have caused so many problems for U.S. banks.

 

The rally was broad, led by energy, metals and technology shares.

 

Freeport-McMoRan Copper & Gold (FCX) was up 3.4% to $69.61. Exxon Mobil (XOM) added 1.6% to $68.66.

 

Stocks of multinationals also surged on the dollar's decline.

 

All 30 Dow stocks were higher, led by Alcoa (AA), up 3.5%. The company reports third-quarter results after Wednesday's close.

 

Right behind were Intel (INTC), JPMorgan Chase (JPM), Merck (MRK), Pfizer (PFE), Hewlett-Packard (HPQ) and Microsoft
(MSFT). The common theme, besides big: They all do at least half their business outside the United States. A lower dollar will boost their quarterly profits. (Microsoft is the publisher of MSN Money.)

 

Boeing (BA) was a loser for most of the day after announcing a delay for the maiden flight of its 747-8 freighter jet. But the stock closed up 1 cent to $52.29.

 

At the same time, 424 S&P 500 stocks were higher, led by Hartford Financial Services (HIG) and Newmont Mining (NEM), one of the largest gold mining companies.

 

Lastly, 95 Nasdaq-100 ($NDX.X) stocks were higher. The index was up 30 points to 1,705. Apple (AAPL), up 2.2% to $190.01, was the leader. The stock is now within 5 percentage points of its all-time closing high of $199.83, set on Dec. 28, 2007.

 

Elizabeth Strott contributed to this report.

 

Short hits from the markets -- New York close
  Tues. Mon. Month chg. YTD chg.
Treasury yields  
13-week Treasury bill 0.070% 0.090% -39.13% -39.13%
5-year Treasury note  2.237% 2.215% -3.49% 44.23%
10-year Treasury note 3.248% 3.224% -1.78% 44.74%
30-year Treasury bond 4.058% 4.023% 0.25% 50.80%
Currencies    
U.S. Dollar Index 76.495 76.835 -0.47% -6.88%
British pound $1.5929 $1.5941 -0.57% 8.11%
(in U.S. $)
U.S. $ in pounds £0.6278 £0.6273 0.58% -7.50%
Euro in dollars $1.4749 $1.4656 0.60% 5.28%
(in U.S. $)
U.S. $ in euros € 0.6780 € 0.6823 -0.60% -5.02%
U.S. $ in yen  88.73 89.53 -0.85% -2.12%
Canada dollar $0.946 $0.935 0.92% 15.63%
(in U.S. $)
U.S. dollar  $1.058 $1.070 -0.91% -13.51%
(in Canadian $)
Commodities        
Gold $1,039.70 $1,017.80 3.01% 17.57%
(per troy ounce)
Copper $2.7845 $2.7270 -1.22% 97.48%
(per pound)
Silver $17.2950 $16.5350 3.82% 46.39%
(per troy ounce)
Corn $3.5825 $3.4150 5.37% -11.98%
(per bushel)
Crude oil  $70.88 $70.41 0.38% 58.92%
(per barrel)  

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