Wall Street’s letting sunlight poke through the dark economic clouds.
Investors went on a stock-buying spree yesterday in hopes of better times ahead, sending prices of tech companies to their highest levels in 11 months.
Another factor driving the rally was that professional traders – who had bet that stocks would keep falling – had to reverse course and buy up shares to cover their backs in short-selling trading strategies.
Short sellers borrow stocks, unload them while they’re falling, and then buy back the shares at cheaper prices to pocket the difference. Because short-sellers prey on gloom and doom, their retreat was taken as a favorable sign.
Two technology giants – Cisco and Sun – fueled the tech rally, boosting the Nasdaq composite index by 21.25, or 1.4 percent, to 1,541.40, its highest close since June.
Cisco jumped 4.5 percent to $16.67, up 72 cents, after a favorable comments from Lehman Brothers analysts on the company’s Internet action.
Sun soared 8.8 percent to $4.21, up 34 cents, on talk it was a possible takeover target.
Cisco rivals Juniper Networks also rose, gaining 53 cents to $12.53.
“Today we are willing to look on the bright side . . . and say that the Fed’s not going to be inclined to raise rates too quickly, and there are some signs the economy’s doing a little better,” said Charles White, president of investment firm Avatar Associates.
The Dow Jones industrial average climbed 122.13, or 1.42 percent, to 8,726.73.
The Standard & Poor’s 500 index added 11.7, or 1.25 percent, to reach 945.11 – its highest gain since August.
Trading volume was busy on the Big Board at 1.4 billion shares, while on the Nasdaq, 1.8 billion shares changed hands.
Increased hope for retailers also helped the rally, after Prudential Securities raised its rating on apparel companies. Among the winners was Ann Taylor, which rose $1.65, or 7 percent, to $24.92.
Altria Group rose $1.40, or 4.4 percent, to $33.10.
Meanwhile, many investors continued to invest in 10-year notes, sending yields to their lowest level in two months.
Traders believe that slowly rising inflation will cause the government to lower interest rates again as soon as next month.
Oil prices also weakened here, falling 50 cents a barrel to $27.22.
Oil prices have fallen 30 percent in the last two months as Middle East oil fields escaped serious disruptions from the Iraqi war and OPEC pumped out more crude in expectation of Iraqi oil field collapses.
In telecom, SBC increased 97 cents to $24.64 on word that rivals such as AT&T Corp. may have to pay SBC twice as much to use its phone lines, thanks to a regulatory ruling on Friday. AT&T fell 4 cents to $16.47.
Shares of other local phone companies rose along with SBC.
Kinder, gentler
Stocks rallied yesterday as investors’ fancies turned to spring and worries about the economy eased. Some news that moved the market:
* Lehman Brothers upped its rating on Cisco Systems and Sun Microsystems was rumored to be a takeover target.
* SBC Communications won approval for a rate increase.
* A Morgan Stanley analyst told Barron’s Altria will rise as investors worry less about litigation.