Sam Collins

Don't Fight the Tape

by Sam Collins   08/04/09

Stocks rallied again yesterday, amid strong bank profits and better-than-expected economic data. For the first time in nine months, the S&P 500 (SPX) closed above 1,000, and the Nasdaq (NASD) closed above 2,000. And the Dow Jones Industrial Average (DJI) closed above 9,200 for the first time since November.

The ISM Manufacturing Index increased for the seventh time in as many months -- this time reporting 48.9 for June. However a sub-50 reading still means that manufacturing is contracting, but the report was better than expected.

The Dow was boosted by gains in commodities.

Alcoa (AA) jumped 7.2%. Bank of America (BAC) rose 2.1% after a management shakeup and an agreement to pay $33 million to settle an SEC civil suit over bonuses paid to Merrill Lynch employees. Ford (F) reported its first increase in monthly sales since '07.

Energy stocks were especially strong: Massey Energy (MEE), Peabody Energy (BTU), Denbury Resources (DNR) and Nabors Industries (NBR) all rose more than 5%.

Foreign financial stocks pulled their own weight. Barclays (BCS) and HSBC (HBC) led gains in European financials. And domestic banks did well with KeyCorp (KEY) up 11% and Zions Bancorp (ZION) up 4.2%.

The Dow gained 115 points yesterday, closing at 9,287, the S&P 500 was up 15 to 1,003, and the Nasdaq gained 30 points, closing at 2,009.

The NYSE traded 1.2 billion shares with advancers ahead of decliners by 5-to-1. The Nasdaq traded 666 million shares with advancers ahead by more than 2-to-1.

September crude oil rose to $71.58 a barrel, up $2.13, on another day of weakness in the U.S. dollar and more confidence in the world's economies. The Energy Select Sector SPDR (XLE) gained $1.30 to $51.92.