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CNBC ON DIGG

Dow Ends Above 10,000; Cisco Boosts Techs

Published: Thursday, 5 Nov 2009 | 4:37 PM ET

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By: Cindy Perman
Writer

Stocks rallied Thursday after a strong reading on productivity and an easing in jobless claims — an encouraging sign ahead of Friday's jobs report.

The Dow Jones Industrial Average shot up 203.82, or 2.1 percent, to close at 10,005.96 — the first time the index has finished above 10,000 since Oct. 22. All 30 Dow stocks finished higher.

Techs were among the best performers after Cisco posted strong results after the bell Wednesday.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

Today's rally came after two straight mixed sessions, with a late selloff Wednesday wiping out what had been strong gains. Stocks remained strong after the Fed's latest pledge to keep interest rates low for an extended period, but a vote in Washington to limit credit-card rates raised concerns about bank earnings and helped pare much of those gains.

In today's economic news, nonfarm productivity in rose at its fastest pace in six years while new jobless claims and the four-week moving average of claims fell to 10-month lows.

FOR INVESTORS

"The steady decline in initial claims is convincing evidence that the pace of firing is tapering off," Zach Pandl, analyst at Nomura Securities International, said in a note to clients. "Overall these data offer more evidence that US labor market conditions are gradually improving."

On Friday, we'll get the government's October jobs report — Economists expect to see that 175,000 jobs were shed from nonfarm payrolls, fewer than in previous months, and that the unemployment rate ticked up to 9.9 percent.

The Bank of England and European Central Bank both held their interest rates steady, as expected. There had been some buzz that the ECB was considering raising European rates. Only Australia and Norway have so far raised rates. Iceland actually cut rates.

Banks advanced, with Bank of America [BAC Loading... () ] and Citigroup [C Loading... () ] both up more than 2 percent, after a study suggested commercial real estate is likely to bottom in 2010.

Homebuilders also rallied, with Beazer and Pulte Homes among the biggest gainers, after the Senate voted to extend the first-time homebuyers' tax credit through April 30. First-time buyers will be eligible for an $8,000 tax credit. The measure was also extended to current homeowners: Anyone who's owned a home for at least five years and decides to move will get a $6,500 tax credit.

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A report out from Freddie Mac today showed 30-year fixed mortgage rates fell below 5 percent again: The 30-year averaged 4.98 percent last week.

Cisco [CSCO Loading... () ] rose 2.8 percent after the networking-gear maker said the tech sector has hit bottom and a recovery is underway.

"There will be a good chance we will look back to see that Q3 was in fact the bottom, that Q4 was the tipping point, and the recovery started aggressively in Q1 of fiscal '10," Cisco CEO John Chambers said.

Semiconductors also rallied, with Intel [INTC Loading... () ] up 1.6 percent, after a report showed chip sales are expected to rise 10 percent next year.

U.S.-traded shares of Toyota [TM Loading... () ] gained 1.4 percent after the Japanese automaker unexpectedly posted a profit and cut its full-year loss forecast in half as stimulus programs around the world — both those specific to autos and to economies as a whole — boosted sales.

Hyatt Hotels [H Loading... () ] rose 12 percent in its debut on the New York Stock Exchange. Its IPO of 38 million shares priced last night at $25 a share, within the expected range.

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Retailers reported their October sales this morning and more than half fell short of expectations. The sector traded mixed: JCPenney and Kohl's fell. Nordstrom and Gap advanced as retail analyst Dana Telsey said she's seeing some signs of a shift to more discretionary spending.

Retail Stocks

Teen retailers were hit hard: American Eagle and Aeropostale missed their targets by a long shot and Abercrombie said its sales fell a whopping 15 percent.

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Pharmaceutical stocks ended mostly higher but health-care stocks were mixed.

IMS Health [RX Loading... () ] jumped 23 percent following news that the health-care data company is being bought by TPG and CPP Investment. But CVS Caremark [CVS Loading... () ] dropped 20 percent after the company's CEO talked about weakness in the pharmacy-benefits-management business.