Stocks rallied broadly Monday, enabling the Dow Jones industrial average to close above the 11,000 mark for the first time since June 7, 2001.
“We had noisemakers in the office,” said Jeffrey Hirsch, who compiles the Stock Trader’s Almanac at the Hirsch Organization in Nyack, N.Y.
The Dow first closed above 11,000 in May 1999, on its way to the all-time closing peak of 11,723 in January 2000. Late last year, the Dow came close to the 11,000 mark several times, but fell back each time. The index lost ground in December.
Looking at the results of the first five trading days of the year, Hirsch said, “It’s positive action, not overly surprising coming off a really negative end of the year.”
From the technical perspective of stock price patterns, the market looks strong, said John Kosar of Asbury Research in northwest suburban Lake in the Hills.
“There’s some stuff behind this market,” he said.
In particular, the so-called breadth of the market–the number of stocks advancing vs. the number declining–has improved since the November rally, Kosar said.
In Monday’s action, winners outnumbered losers by more than a 2-1 ratio among stocks listed on the New York Stock Exchange and more than a 3-2 ratio on the Nasdaq market.
The biggest gainer among the 30 Dow industrials so far this year is General Motors, which was the Dow’s biggest loser in 2005. Monday, GM added $1.61, or nearly 8 percent, to $22.41.
Goldman Sachs boosted its investment rating on GM to “in line” from “underperform.”
Another upbeat factor has been the revival of technology stocks, Kosar said. Last year, the information technology sector of the Standard & Poor’s 500 index barely closed in positive territory, as energy stocks posted the year’s biggest sector gain.
So far this year, tech stocks are neck-and-neck with energy stocks as the market’s leaders.
Monday, the tech-heavy Nasdaq composite index rose 13.07, to 2318.69, well off its all-time high of 5132.52, set in March 2000.
But Monday’s good news was not confined to the large-capitalization stocks that make up the Dow and Standard & Poor’s 500 index.
The Russell 2000 index of small-company stocks closed above 700 for the first time ever, gaining 6.85 points, to 706.24.
Midcap stocks, as measured by the S&P 400 index, also hit a record high, up 5.93, to 768.71.
Stocks managed to rally without the help of the oil and gas sector. In earlier sessions this year, gains by Exxon Mobil and other major energy companies helped lift major market indicators.
Monday, energy and utilities stocks, the two biggest winners last year, lost ground.
Oil for February delivery fell 71 cents a barrel, to $63.50, reflecting mild winter temperatures in much of the nation. Exxon Mobil, a component of the Dow, slipped 3 cents, to $59.40.
Financial-services stocks, a sector picked by many market forecasters to perform well in 2006, contributed to Monday’s gain. American Express and JPMorgan Chase were among the Dow’s leaders.
Analysts at Prudential Securities raised their recommendation on JPMorgan Chase and Merrill Lynch.
Market statistics indicate that a strong January on Wall Street almost always precedes a strong year in stocks.
But Hirsch warned that midterm election years, such as 2006, can be difficult.
Nearly all bear markets, periods of declining stock prices, began and ended two years after a presidential election, Hirsch said.
The strong start to the year “doesn’t change my feeling that this is a trouble year,” he said. “The more cheerleading I hear, the more my contrary antennae tingle. I’d rather be flush with cash at that midterm election bottom.”
Kosar agreed. He said market sentiment is either too bullish or too complacent.
“The market acts very good technically, but we’re probably closer to a near-term top than a near-term bottom,” he said.
Late Monday, a discouraging word came from aluminum giant Alcoa. The company, a component of the Dow and the first major company to post quarterly financial results, failed to achieve earnings that Wall Street expected.
Alcoa shares sank in after-market trading. The company said earnings per share from operations in the fourth quarter were 24 cents a share, compared with 38 cents in the consensus forecast.
The company blamed several factors, including high raw material costs and Hurricane Katrina.
NYSE volume reached 1.66 billion shares, the lowest volume of the new year. Nasdaq volume totaled 1.93 billion shares.
Treasury securities advanced slightly, after remarks by two Federal Reserve officials reinforced optimism that the Fed nearly is finished raising short-term interest rates.
The price of gold to be delivered in February rose $9.30 an ounce to a 25-year high of $550.50 in New York futures trading.
Treasury auctions: Interest rates were mixed in Monday’s auction of 3- and 6-month Treasury bills.
The discount rate on 3-month bills was 4.15 percent, up from 4.07 percent last week. The rate on 6-month bills was 4.25 percent, down from 4.26 percent last week.
The coupon-equivalent investment rates at Monday’s auction were 5.25 percent for 3-month bills and 4.40 percent for 6-month bills.
The Treasury will auction $13 billion of 5-year notes on Wednesday and $9 billion of 10-year inflation-protected notes (called TIPS) on Thursday.
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bbarnhart@tribune.com
