Dow Jones Exceeds 14,000 for Record High

By Karyn Chenoweth Oct 2, 2007, 5:00 GMT

EPA/STR

Despite housing sales slumps and rising credit debt levels, Wall Street began the fourth quarter with a huge rally Monday, sending the Dow Jones industrial average to a record close.

Stocks were buoyed by a growing belief that the worst of the credit crisis has passed.

According to Marketwatch, The Dow rose 191.92, or 1.38 percent, to 14,087.55, surpassing its closing record of 14,000.41 set in mid-July. The blue chip index rose as high as 14,115.51 to eclipse its previous intraday high of 14,021.95 set July 17.

The rally spurred institutional investors to buy; they also seemed to be motivated by a feeling that banks and other financial companies have seen the worse of the recent credit market upheaval.

Both Citigroup and Switzerland's UBS AG issued third-quarter profit warnings, but indicated the current period might see a return to normal earnings levels.

Marketwatch also claims interest rate cuts may help the buoyant market – with the Federal Reserve believed to issue another interest rate cut at its Oct. 30-31 meeting.

The Institute for Supply Management said the manufacturing sector grew in September at the slowest pace in six months; the trade group said its index of manufacturing activity registered at 52.0 in September, below forecasts for a reading of at least 52.5.

"People are getting more confident there is going to be an October rate cut," said John C. Forelli, portfolio manager for Independence Investment to Marketwatch. "To some degree, it looks like Citi kitchen-sinked the quarter and that from here going forward will be calmer. That's underpinning the financials."

The big deal between Nokia, offering $8.1 billion offer to buy navigation-software maker Navteq Corp, also helped the market.  The deal was seen as a signal that corporations are feeling comfortable in making big moves despite recent market turbulence.

The Standard & Poor's 500 index rose 20.29, or 1.33 percent, to 1,547.04, nearing its all-time trading high of 1,555.90, also reached in mid-July. The Nasdaq composite index rose 39.49, or 1.46 percent, to 2,740.99; the tech-laden index remains well below its high of 5,048.62, reached in 2000 when it was bloated by the internet start-up boom.

The Dow turned in an up-and-down third quarter with a 3.6 percent gain, after the Fed eased investor concerns over the credit and housing markets by lowering key interest rates half a percentage point.

Bonds also moved higher Monday, with the yield on the benchmark 10-year Treasury note falling to 4.55 percent from 4.59 percent late Friday.

Fixed-income investors, eyeing the dollar's slide in valuation to other currencies, including the Canadian Loonie, interpreted the ISM report in a positive light; the interest rate cut would not further erode the U.S. currency.

The dollar was mixed in valuation on Monday against other major world currencies, while gold prices climbed in value.

Marketwatch noted that the Russell 2000 index of smaller companies was up 19.31, or 2.39 percent, at 824.76.

Advancing issues led decliners by a 3 to 1 basis on the New York Stock Exchange, where consolidated volume rose to 3.26 billion shares from 2.92 billion shares on Friday.

And overseas, Britain's FTSE 100 rose 0.61 percent, Germany's DAX index rose 0.77 percent, and France's CAC-40 added 1.01 percent. In Asia, Japan's Nikkei stock average closed up 0.36 percent, while the market was closed in Hong Kong for a holiday.

New York Stock Exchange: http://www.nyse.com
NASDAQ Stock Market: http://www.nasdaq.com