By Mark CottonU.S. stocks rallied late in Monday's session on...

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    By Mark Cotton

    U.S. stocks rallied late in Monday's session on strength in the technology sector, as investors appeared optimistic that a decline in the price of oil over the last two months will suffice to sustain consumer spending and offset a slowing housing market.

    But shares of Altria Group Inc. (MO) sank as the company and other tobacco makers faced a new lawsuit alleging they minimized the dangers of cigarette smoking by branding some of their products as "light" or "low tar."

    With less than an hour of trade left, the Dow Jones Industrial Average (DJI) rose 102 points to 11,609.59. Of the 30 components, 27 contributed to gains.

    The Nasdaq Composite Index (RIXF) was up 33 points at 2,252 while the S&P 500 Index (SPX) was up 14 points at 1,328.

    The S&P 500 is on track to close at a fresh five-and-one-half year high.

    The latest housing report did little to dispel the view that the housing market is slowing down.

    Although sales of existing homes in August didn't fall as sharply as expected, median sales prices fell for the first time in 11 years, while inventories of unsold homes rose to 3.92 million, a 7.5-month supply at the August sales pace, the most since April 1993.

    "The message from the markets seems to be that the good news of declining energy prices will offset the bad news of a declining housing market, and will lead to a soft landing or at the very most, a mid-cycle correction," said Hugh Johnson, chairman of Johnson Illington Advisors, explaining Monday's gains.

    Earlier, Richard Fisher, the president of the Dallas Federal Reserve Bank acknowledged there is a "serious correction" taking place in the housing sector, but said outside of that, the economy is "healthy and robust."

    In a speech prepared for delivery in Monterrey, Mexico, Fisher said he continues "to fret more about inflation than I do about growth"

    Fisher dismissed the benign August PPI report released last week as unreliable. The best gauges of inflationary pressures "are not yet comforting," he said.

    On the broader market for equities, advancers had an 11 to 5 advantage over decliners on the New York Stock Exchange, and led by 9 to 5 on the Nasdaq.

    By sector, energy (XOI) and oil services stocks (OSXX) were the most notable decliners as the recent pullback in crude-prices continued to weigh.

    Gold stocks (GOX) also fell as the precious metal came under pressure on the future markets.

    Airlines, retailers (RLX) , semiconductors (SOXX) , utilities (26099800) and Internet stocks (GIN) were areas of the market posting solid gains.

    Volume was 1.398 billion on the Big Board, and 1.501 billion on the Nasdaq.

    Oil, dollar, gold, bonds

    Crude-oil futures bounced off a 10-month low below $60 a barrel after the Organization of The Petroleum Exporting Countries voiced concerns over the recent price decline, raising the prospect of a production cut.

    Crude for November delivery closed up 90 cents at $61.45 a barrel, after earlier striking a session low of $59.52.

    Elsewhere in energy, natural-gas futures slumped to a near 3-year low while October unleaded gasoline futures hit a contract low.

    The dollar fell against its major counterparts after the housing data.

    The dollar late in the day was down 0.2 % at 116.48 yen. The euro, meanwhile, was off 0.1% against the dollar at $1.2758.

    Gold futures ended higher after spending most of the session in negative territory. Higher oil prices and strong physical demand buoyed the precious metal.

    The benchmark December contract rose 50 cents to $595.50 an ounce, its highest closing level in nearly two weeks.

    On the bond market, prices for Treasurys rose, keeping yields at their lowest level in almost seven months. The weak housing data helped offset any negative impact from Dallas Fed President Richard Fisher's remarks on inflation.

    The benchmark 10-year note closed up 10/32 at 102 17/32, with its yield (TNX) at 4.555%.

    Stocks on the move

    Altria Group Inc. (MO) fell as much as 5.3% to a more than two-month low of $ 77.96 after a federal judge granted class-action status to a racketeering lawsuit against Philip Morris USA and several other large makers of "light" and "low tar" cigarettes, according to a posting on the Pacer Web site. Pacer is the official document retrieval Web site of the federal court system. The suit accuses the companies of misleading consumers by labeling certain brands as light or low tar. Philip Morris USA said Monday it will seek an appellate review of a federal judge's decision.

    The stock was last off 4.3% at $78.78, and remained the biggest percentage decliner on the Dow industrials.

    The other tobacco makers cited in the lawsuit are Reynolds American's (RAI) ,

    R.J Reynold Tobacco Co., Loews Corp.'s (LTR) Lorillard tobacco unit, Vector Group's (VGR) Liggett unit and British American Tobacco (BTI)

    Hewlett-Packard Co. (HPQ) rose 1.4% to $35.59 after Chief Executive Officer Mark Hurd said late Friday he would immediately assume the role of chairman after Chairwoman Patricia Dunn resigned from the board over a spying scandal. Dunn had already said she would be stepping down as chairwoman, but not until January 2007.

    Dunn has been under pressure because of questionable practices used in an investigation she authorized to discover who was leaking boardroom information to the media.

    Walgreen Co. (WAG) , the nation's largest drugstore chain, reported a 25% rise in fourth-quarter net income, helped by strong sales of prescription drugs. But the company's stock was under pressure, falling more than 5.5% at one point in the session.

    Bear Stearns analyst Robert Simmons said in a note to clients that the market may have expected Walgreen to exceed the average estimate, given the much stronger-than-expected sales it reported earlier in the month.

    The company's stock has lost about 10% of its value since late last week when Wal-Mart Stores Inc. (WMT) said it would slash prices on hundreds of generic drugs. The stock was last down 5.5% at $44.31.



 
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