Stocks End With Broad Gains on Strength in Tech, Energy
Stocks closed higher across the board as investors were encouraged by solid economic data and bid up technology and energy stocks.
"We're very, very bullish because we think the economy is going to continue to be in a positive trajectory," said Tony Dwyer, equity market strategist at FTN Midwest Securities. "We've been anticipating this mid-cycle slowdown ... the bull story is that business spending remains positive."
Gains on Tuesday were broad-based with all ten S&P economic sectors trading higher. Energy stocks such as Exxon Mobil led gainers, as crude oil prices rose to just above $75 a barrel.
Strong advances in tech shares such as Apple and Yahoo gave a lift to the Nasdaq Composite, which posted its best four-day gain since November 2003, gaining 5.2% in the past four sessions.
The Dow Jones Industrial Average was boosted by strong sales from General Motors, while the broader S&P 500 closed up 1.1%.
"The one thing I feel pretty highly confident on is owning tech and some biotechs," said Doug Sandler, chief equity strategist with Wachovia Securities. "It's probably not going to be a bet that comes back and bites you in the next couple of months."
Investors were encouraged by solid monthly manufacturing data as the Institute for Supply Management said its manufacturing index fell to 52.9, which was in-line with economists' expectations but still reflected moderate manufacturing growth.
Economic data is expected to be scrutinized by traders this week ahead of the Sept. 18 Federal Reserve policy meeting.
"Investors are still cautious, but we are seeing some good buying across the board," Kevin Kerr, senior analyst at Resource Trader Alert, told CNBC.com. "I think the Fed has really broadcast that they are going to cut, and it would be a huge disappointment if they don't follow through."
"I do think this is going to set the precedent of whether we get a 25- or 50-basis point cut," said Ned Riley, CEO of Riley Asset Management. "People are still anxious. They're debating whether the Fed should cut or not."
Wall Street got the latest numbers on monthly sales from major automakers. Toyota Motor said August U.S. sales fell 2.8%, while shares of Dow component General Motors closed higher after the automaker surprised Wall Street with an unexpected rise in August auto sales of 5.3%.
Ford Motor said its August U.S. sales fell 14.4% from the same month a year ago. The company blamed the decline on a drop in demand for both light trucks and cars.
Tech stocks did well on positive news for a handful of sector bellwethers.
Shares of Apple ended with strong gains after Piper Jaffray raised its 52-week price target on the stock to $211 a share, the highest forecast among Wall Street analysts.
Yahoo rose after Bear Stearns named the Internet company as its top pick.
"The bullish case is when you look at the S&P, we're at 10-year P/E multiple lows," said Andrew Schwarz, a partner with AGS Specialist Partners. "It's like a great sale on equities, and yet, there are still big, dark clouds out there from all the credit problems."
New York light sweet crude futures rose more than a dollar to trade above $75 a barrel as traders kept an eye on storms in the Atlantic.
In other economic news, construction spending fell by 0.4% in July, more than the 0.1% decline analysts were looking for.
A wave of good news came from the European banking sector, with Barclays saying on Monday that its subprime losses would be limited and Deutsche Bank stating Tuesday that it had no problems with funding availability.