Forget the Labor Day picnic, the real party is today. Stocks kicked off September with a rally, inspired by the more than $7 drop in oil prices and a surge in the dollar.
"This is just what we needed — just what the doctor ordered," Gordon Charlop of Rosenblatt Securities told CNBC. "Everything’s going to benefit here. The financials are going to become more solid. The foundations will be stronger. People will have more discretionary money. Retail sales will go up."
Crude oilplunged to around $108 a barrelafter Hurricane Gustav passed through the Gulf of Mexico, sparing most major oil facilities. The dollar rallied to a more than two-year high against the euro due to the drop in oil prices and worries about a slowdown outside the U.S.
Keep your party hats handy because, analysts say, oil is going to keep going and could soon drop below $100 a barrel, a level it hasn't seen since April.
"It would take a really major storm to change the direction in crude oil in the midst of its major correction since July, and Gustav is not it," Chris Jarvis, senior analyst for Caprock Risk Management, told Reuters. "Could we drop back below $100? Certainly."
Retailers advanced amid the expectation that lower oil prices will translate into more money for consumers. Not only did the discounters advance, but beaten-up department stores showed signs of life: JCPenney and Macy's were both up more than 4 percent.
Banks rallied on the thinking that, if consumers have more money, there will be fewer mortgage defaults. Bank of America jumped 5 percent, while Wachovia was up more than 3 percent.
Lehman Brothers advanced after state-owned Korea Development Bank (KDB) confirmed that it was in talks with for a possible investment in Lehman. Other reports said the price of the deal remained an issue.
Airline stocks soared, with Delta , Northwest and United parent UAL all up more than 15 percent.
Commodity-related stocks were the only drags on the Dow: Chevron was the biggest decliner, followed by Alcoa and ExxonMobil .
The S&P energy-sector index was down 3.5 percent.
Google was up 3 percent ahead of the debut of Chrome, Google's own Web browser aimed at competing with Internet Explorer. The browser is designed to more quickly handle video-rich or other complex Web programs.
Stocks of pharmaceutical giants Merck and Schering-Plough ticked higher despite two reports and an editorial in The New England Journal of Medicine about the potential cancer riskassociated with their popular cholesterol-fighting drug Vytorin.
On the economic front, the Institute of Supply Management reported its gauge of manufacturing activity slippedto 49.9 in August from 50 in July. New orders rose as prices paid fell, but a measure of employment also declined. Construction spending slipped 0.6 percent in July, compared with a 0.3 percent increase in June.
MONDAY-THURSDAY: Republican National Convention
TUESDAY: ISM manufacturing; construction spending
WEDNESDAY: Weekly mortgage applications; ADP employment report; factory orders; crude inventories; Fed's beige book; Earnings from Staples, H&R Block and Hovnanian
THURSDAY: Monster employment report; jobless claims; productivity; ISM services index; Fed's Yellen speaks; Earnings from Toll Brothers
FRIDAY: August jobs report; earnings from Nat Semi
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