Nasdaq index hits 29-month high as stocks rally on
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Stocks extended their hot 2-month-old rally Tuesday, as some market bulls evidently saw no reason to back off before the election results and the Federal Reserve’s meeting on Wednesday.
At a minimum that suggests high confidence in a big win for the GOP, which many investors naturally would see as a pro-business vote.
The tech-dominated Nasdaq composite index (charted below) became the first of the broad U.S. market indexes to finish above its spring closing high, rising 28.68 points, or 1.1%, to end at 2,533.52. That topped the spring peak of 2,530.15 reached on April 23, and left the Nasdaq at its highest level since June 5, 2008 -– three months before the financial-system meltdown began.
Riding strong earnings gains and a surge in takeover activity, tech stocks have been the market’s stars over the last month in particular. Of 10 major industry sectors in the Standard & Poor’s 500 index, tech has led over the last month, with the average tech issue up 7.9% since Oct. 1, nearly double the gain of the average S&P 500 stock.
Software giant Oracle Corp. on Tuesday added another company to its stable, agreeing to pay about $1 billion in cash for e-commerce software maker Art Technology Group. The target’s shares surged $1.85 to $5.95. Oracle rose 40 cents to $29.53, its highest since 2001.
“The tech sector has the most cash and they’re doing the most M&A [mergers and acquisitions],” said Art Hogan, chief market analyst at brokerage Jefferies & Co. in Boston. That’s a continuing lure for investors, he said.
Year to date the Nasdaq index now is up 11.6% compared with the 7% rise in the S&P, not counting dividends.
Other major indexes remain below their spring peaks, though they’ve gotten a lot closer in recent weeks. The Dow Jones industrial average on Tuesday tried for a second straight session to take out its spring high, but fell short.
The Dow rose as high as 11,219 but closed at 11,188.72, up 64.10 points, or 0.6%. The 2010 closing high was 11,205 on April 26. The Dow is up 7.3% this year.
The powerful stock rally of the last two months has been underpinned by some better-than-expected economic data, expectations of a Republican victory in the elections and the Federal Reserve’s strong hint that it would pump more money into the financial system to keep longer-term interest rates low.
Fed policymakers will detail those plans after they wrap up a two-day meeting on Wednesday.
“Buy on the rumor, sell on the news” is a strategy as old as Wall Street itself. That’s the risk heading into the next trading session, of course. But the market action Tuesday clearly wasn’t betraying much fear of an imminent setback.
Once the election results are in and the Fed’s plans are on the table, one other big potential market-moving event looms this week: the government’s report Friday on October employment trends.
-- Tom Petruno