U.S. investors rushed in to scoop up bargains on Wall Street Monday, after stock prices plunged between 14 and 16 percent last week. The major stock averages closed sharply higher on relatively heavy volume.
The Dow Jones Industrial Average climbed 368 points (4.5 percent) to 8,603. The tech-weighted Nasdaq composite gained 5.3 percent, closing 76 points higher at 1,499. The broader Standard & Poor's 500 Index went up 37 points, almost four percent to 1,003.
Most of the money flowed toward quality names, big-capitalization companies with proven performance records. A major investment firm upgraded shares of General Electric and construction equipment maker Caterpillar, saying these industrial giants are in position to benefit from a rebound in U.S. manufacturing. Leading computer company IBM also traded higher. All three are Dow components.
Experts debated whether there was any real conviction behind Monday's rally. Opinions varied. But analysts could agree on one thing: after the high selling pressure of last week, the market's move to the upside felt very good.
Stocks are not expected to move up in a straight line. The September 11 terrorist attack worsened the outlook for corporate profits, one of the fundamentals that drives the stock markets.
However, Hugh Johnson, an investment strategist with First Albany, is hoping stocks reached their lows last week. "What we saw in the market last week was very symptomatic of the last stage of a 'bear' market [sharply declining market]," he said. "You know, when you have breadth lop-sided - the number of stocks declining beating the number of advances by 9-1 - that's the stuff that makes for 'bear' market bottoms. So, I'm hoping this just isn't a temporary rally but is a lift-off from a 'bear' market bottom."
But analysts concede stock market activity at this point will likely depend on political and military news rather than economic data. Analyst Art Hogan from the Jefferies investment firm said, "It's sort of tenuous times. We don't know exactly what front this war is being waged on and what events could happen over a week, terrorist activity or geopolitical events or military actions. So clearly it's going to be very difficult to talk anybody into taking positions on a very long-term basis."
But, at least on Monday, the markets appeared to find their footing, some stability after last week's heavy selling. Even airline stocks edged higher, analysts say, partly because of a government bail-out plan for the industry.
Not even negative corporate news deflated investors. Shares of industrial powerhouse Honeywell International gained more than 17 percent, after the company lowered its earnings estimates and said it plans to have eliminated 13 percent of its workforce by year's end.