equities shine as instos buy back

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    Surge in oil, broad-based buying in blue chips and techs propel indexes to hefty gains.
    December 16, 2002: 5:41 PM EST
    By Parija Bhatnagar, CNN/Money Staff Writer

    NEW YORK (CNN/Money) - U.S. indexes surged to a close Monday after triple-digit gains for the Dow industrials, a broad-based technology rally, and a surge in oil prices broke stocks out of a two-week malaise.

    The Dow Jones industrial average (up 193.69 to 8627.40, Charts) gained 2.3 percent, while the Nasdaq composite (up 37.91 to 1400.33, Charts) rose 2.8 percent. The Standard & Poor's 500 index (up 20.92 to 910.40, Charts) advanced 2.3 percent.

    Stocks gains accelerated during mid-morning on the back of some bullish forecasts for U.S. equities. Lehman Brothers upped its exposure to the U.S. equity market Monday to 50 percent from 39 percent, while Goldman Sachs told investors that U.S. corporate profits were expected to see better improvement than in Europe.

    Financials, telecoms and blue-chip techs led the day's advance, while energy stocks were boosted by a sharp hike in the price of oil.

    Light crude oil futures gained $1.59 to $30.04, hitting a two-month high on fears of a shortage as a strike in Venezuela headed into its third week.

    Some traders were optimistic that stocks would get a seasonal December bounce despite a weak start to the final trading month of the year as the "tax-loss" selling period for institutional investors abated. Institutional fund managers typically close their books toward the year's end. So, in order to offset the profits with the losses in their clients' portfolios, they sell their high-cost poor-performing stocks in November and buy back some of these stocks toward the end of December and in January, after a stipulated 30-day waiting period.

    That strategy tends to create what some analysts call the "January effect," in which institutional buying at the beginning of the year drives up stocks.

    Market breadth was positive on light volume. On the New York Stock Exchange, advancers beat decliners about 2 to 1 as 1.2 billion shares were traded. On the Nasdaq, winners edged losers 2 to 1 as 1.3 billion shares changed hands.

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