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NEW YORK (CNN/Money) -
Stocks jumped Monday, led by the Nasdaq, at the end of an otherwise tough month for Wall Street, in which worries about inflation and slower earnings and economic growth dominated.
After the close, Dell (Research) warned that third-quarter earnings will come in at the lower end of its previous forecast, due to weaker U.S. and U.K. personal computer sales. Dell shares slipped 3.6 percent.
Following the Dell news, Nasdaq and S&P futuresfell, pointing to a weaker open for stocks Tuesday, when fair value is taken into account.
The Nasdaq composite (up 30.42 to 2,120.30, Charts) gained just short of 1.5 percent. The Dow Jones industrial average (up 37.30 to 10,440.07, Charts) gained nearly 0.4 percent and the broader S&P 500 (up 8.60 to 1,207.01, Charts) index added 0.7 percent.
Treasury prices edged up, lowering the corresponding yields and the dollar rallied versus other major currencies.
Multi-billion dollar mergers in the gold, drug and telecom sectors helped fire up a market rally Monday. Adding to the good tone was a drop in oil prices, upbeat reads on personal income and spending, as well as a strong read on manufacturing.
The major gauges have risen for two sessions in a row, bouncing back at the end of a brutal month. While the advance was positive, some analysts are wary about calling the gains something more than a snap back.
On one hand, there are a number of technical market indicators that suggest that the market is groping for a floor, which would be a positive, said Barry Ritholtz, market analyst at Maxim Group. "But I'm not convinced we've hit a bottom just yet."
Ritholtz says that a few more weeks of essentially sideways trading might lead the markets to a November low, which would then set the stage for a bigger rally.
"When you see stocks up on a day when oil is down and there’s a bunch of mergers, like today,” Ritholtz said, “it’s hard to say that the gains are signaling a bigger change in direction."
For the month, the Nasdaq lost 1.4 percent, the S&P 500 lost 1.8 percent and the Dow 30 lost 1.2 percent.
Wall Street seems to have factored in Tuesday's expected 25 basis point interest-rate hike from the Federal Reserve, said John Forelli, portfolio manager at Independence Investments.
The central bank meets tomorrow and is widely expected to boost the Fed funds rate, an overnight bank lending rate, by a quarter-percentage point. (Full story.)
"The market has probably factored in 25 basis point hikes at the next two meetings,” said Forelli. “Where’s there’s more of a question is the January meeting, Greenspan’s last meeting.”
Federal Reserve Chairman Alan Greenspan’s term ends after the January 31, 2006 meeting.
U.S. light crude oil for December delivery slipped $1.46 to settle at $59.76 a barrel on the New York Mercantile Exchange.
Stocks gained Friday too, as investors cheered a report showing strong economic growth in the third quarter, despite two massive hurricanes and surging oil prices.
Merger Monday
Gold producer Barrick Gold (down $1.95 to $25.25, Research) said it has made a bid for rival Placer Dome (up $3.44 to $19.95, Research), worth $9.2 billion in cash and stock.
Barrick shares fell more than seven percent, while Placer shares jumped over 20 percent in very active New York Stock Exchange trade.
Saks said it was selling its Northern department store group to Bon-Ton Stores for $1.1 billion in cash. Saks (up $1.49 to $18.15, Research) shares added 9 percent and Bon-Ton Stores (up $3.39 to $20.05, Research) added more than 20 percent.
Novartis, a Swiss drugmaker, said it would buy the remaining stake in U.S. vaccine maker Chiron (up $0.74 to $44.14, Research) for $5.1 billion, $600 million more than an earlier bid. Chiron shares gained 1.7 percent.
Spanish telecom provider Telefonica has agreed to buy mobile phone company O2 PLC for $31.6 billion.
PMC-Sierra (up $0.76 to $7.10, Research) jumped 12 percent after the chipmaker said it had agreed to buy Agilent Technologies Inc. (up $1.01 to $32.01, Research)'s storage semiconductor business for $425 million in cash.
A variety of other chip stocks gained, too, sending the Philadelphia Semiconductor (up 7.77 to 432.64, Charts) index, or the SOX, up 1.8 percent.
Among other movers, Dow stock Wal-Mart Stores (up $1.81 to $47.31, Research) gained 4 percent after the world's largest retailer said that October sales at stores open a year or more should grow 4.3 percent from a year ago.
That's an improvement on previous guidance for growth of between two percent and four percent.
Fellow Dow stock Caterpillar (up $1.52 to $52.59, Research) gained 3 percent after its CEO said that the company compounded average earnings growth of 15 percent to 20 percent.
Oil service stocks bounced, sending the Amex Oil (up 16.64 to 985.62, Charts) index up 1.7 percent.
Homebuilders gained as well, sending the Dow Jones Home Construction (unchanged at $859.67, Research) index up 2.5 percent.
On the downside, Qualcomm (down $1.31 to $39.76, Research) slipped more than 3 percent in active Nasdaq trade on a Merrill Lynch downgrade of the wireless company.
Market breadth was positive. On the New York Stock Exchange, winners topped losers by more than three to one on volume of 1.9 billion shares. On the Nasdaq, advancers beat decliners by seven to three as 1.91 billion shares changed hands.
Personal income jumps in September
The morning brought several economic readings.
September personal income rose 1.7 percent after falling a downwardly revised 0.9 percent in August. Economists surveyed by Briefing.com thought it would rise 0.4 percent. Personal spending rose 0.5 percent, in line with forecasts. Spending fell 0.5 percent in August.
The Chicago PMI, a reading on manufacturing in the Midwest region, was released shortly after the open. The index rose to 62.9 in October from 60.5 in September. Economists, on average, expected it to fall to 57.2.
Treasury prices climbed, lowering the yield on the 10-year note to 4.55 percent from 4.57 percent late Friday. Treasury prices and yields move in opposite directions.
The dollar gained versus the euro and yen.
COMEX gold fell $7.90 to settle at $466.90 an ounce, tumbling with other dollar-traded commodities.
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