NEW YORK (CNN/Money) -
U.S. stock markets rallied anew Monday, building on last week's surge, on bets that a strong economy and what is likely to be a solid first-quarter earnings reporting period will justify continued market advances.
The Dow Jones industrial average (up 87.78 to 10558.37, Charts) gained just over 0.8 percent, the Standard & Poor's 500 (up 8.76 to 1150.57, Charts) index gained about 0.75 percent and the Nasdaq composite (up 21.95 to 2079.12, Charts) gained more than 1 percent.
"I think on balance people are feeling better realizing that earnings will be good, and that, as opposed to how it looked in March, the economy is picking up as well," said Douglas Altabef, managing director at Matrix Asset Advisors. "I would expect this to last in the short-term.
"You'll see markets continue to do the Cha-Cha, moving higher, but paced by brief retrenchments," Altabef added. "It's not going to be as good as last year, but I think 2004 will still be a good year for the stock markets."
Adding to the market upswing right now is optimism about the start of the earnings reporting period, which heats up Tuesday with the release of results from Dow component Alcoa (AA: Research, Estimates) after the close. The aluminum producer is thought to have earned 42 cents per share, up from 23 cents a year earlier, according to First Call estimates.
Analysts predict that first-quarter earnings rose almost 17 percent from a year earlier, according to First Call, but the firm's analysts think the real earnings numbers could actually be higher, based on the lack of negative pre-announcements. (For a look at the week's biggest earnings, click here.)
"This week is pretty light on the economic news," said Tim Heekin, head of stock trading at Thomas Weisel Partners. "The first-quarter earnings should be good and should provide some sort of cushion for the markets."
After the close of trade, Bank of America (BAC: Research, Estimates) said it would cut 12,500 jobs because of its $48 billion purchase of FleetBoston Financial (FBF: Research, Estimates).
In addition, Kellogg (K: Research, Estimates) boosted its first-quarter and full-year outlook because of stronger-than-expected sales growth and the benefit of a weak dollar
Monday's market and movers
The market opened in positive territory Monday and built on those gains throughout the session. Supporting the advance was the release of the Institute for Supply Management's services index for March. The index, which had been expected to come in at 61, soared instead to 65.8 from the previous month's 60.8.
U.S. stock markets zoomed Friday after the monthly employment report showed that employers added a surprisingly robust 308,000 jobs to their payrolls in March, a considerable surge from the previous month and far more than what economists were expecting. U.S. stocks also managed to close higher on the week.
The one downside of the strong report and other recent positive economic news is that it's brought the acknowledgement that interest rates are going to rise sooner than what market watchers had previously expected. That acknowledgement in the stock markets muted the gains Monday, Altabef added.
"However, the rising of interest rates from the current abysmal levels wouldn't be a bad thing, as it would be happening because of positive reasons, because the economy is strengthening," Altabef said.
Gains spanned a number of sectors, with 25 out of 30 Dow components closing higher, paced by Intel (INTC: up $0.43 to $28.55, Research, Estimates), General Electric (GE: up $0.52 to $31.58, Research, Estimates), Caterpillar (CAT: up $1.21 to $82.41, Research, Estimates) and United Technologies (UTX: up $1.49 to $89.23, Research, Estimates).
Components International Paper (IP: down $0.27 to $42.40, Research, Estimates) and AT&T (T: down $0.11 to $19.49, Research, Estimates), both of which are leaving the Dow 30 this week, were among the few decliners.
Among other movers, Cigna (CI: up $6.90 to $67.55, Research, Estimates) surged 11.4 percent after the insurer boosted its first-quarter and full-year earnings outlook because of stronger performance from its health care business than had been expected. Earlier in the year, the company had announced job and dividend cuts amid mixed fourth-quarter results.
Shares of Oxford Health Plans (OHP: up $7.65 to $57.97, Research, Estimates) rallied 15.2 percent after a Wall Street Journal article said that the HMO was in discussions to be taken over by rival WellChoice (WC: down $0.36 to $37.09, Research, Estimates).
IPIX (IPIX: up $4.66 to $11.65, Research, Estimates) was unusually active on the Nasdaq, gaining 66.7 percent after the developer of Internet video technology said that it sold $5 million worth of common stock to private institutional investors.
On the downside, Sun Microsystems (SUNW: down $0.12 to $4.94, Research, Estimates) pulled back 2.4 percent and topped the Nasdaq's most actives list after rallying about 20 percent Friday on news that it will receive $1.6 billion from Microsoft (MSFT: up $0.10 to $25.95, Research, Estimates) to settle ongoing legal disputes.
Shares of Nortel Networks (NT: down $0.23 to $6.06, Research, Estimates) dropped about 3.7 percent after the telecom gear maker said the U.S. Securities and Exchange Commission has started a formal probe into the company's restatement of previous financial results that led to the suspensions of its chief financial officer.
In the day's biggest deal, J.C. Penney (JCP: up $0.07 to $34.90, Research, Estimates) said it will sell its Eckerd drugstore unit to CVS and Canadian company Jean Coutu Group for a total of $4.5 billion. Penney had long been expected to sell the troubled drug chain and the news had little impact on the stock.
Market breadth was mixed. On the New York Stock Exchange, where 1.39 billion shares traded, decliners outnumbered advancers by more than nine to eight. On the Nasdaq, gainers beat losers by nearly five to three, on volume of 1.71 billion shares.
Treasury prices continued to fall after taking a beating Friday and in response to the strong ISM numbers. The 10-year note lost 17/32 of a point in price for a yield of 4.21 percent. The dollar rose versus the yen and euro.
Among commodities markets, NYMEX light sweet crude oil prices fell a penny to end the session at $34.38 per barrel. COMEX gold fell $6.20 to settle at $416.30 per ounce.
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