Stocks shot out of the gate Tuesday as the price of oil plunged more than $7 and the dollar surged.
"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.
"What I am going to be watching is the destruction of the commodities stocks today," Matt McCall, president of Penn Financial Group based in Denver, told Reuters. "What we've seen over the last two months is money coming out of energy into financials and technology."
Indeed, 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.
Airline stocks soared on the oil drop, with Delta, Northwest and United parent UAL all up more than 15 percent.
Lehman Brothers jumped 8 percent 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.
Googlewill unveil its own Web browser later in the day, 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 slipped to 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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