U.S. Stocks Kick Off Quarter Bullishly, Push Dow To Record High

NEW YORK (MarketWatch) -- Stocks rallied at the outset of the fourth quarter on Monday, pushing the Dow to record heights as traders tried to put this summer's credit crisis behind after a hefty profit-warning from Citigroup Inc.

"One thing the market can't stand is the unknown; today we know some of the damage - that gives us some solace that perhaps we can move on," said Art Hogan, chief market strategist at Jefferies & Co.

After crossing the 14,000-level for the first time since late July, the Dow Jones Industrial Average gained 191 points to close at a new record of 14,087. Earlier, the blue-chip average hit a new record intraday high of 14,115.

All but two of the Dow's 30 components advanced, led by Citigroup Inc. and financial peers American Express and JP Morgan Chase .

The best performer on the Dow was McDonald's Corp. , which rose 2.8%, while General Motors Corp. fronted the Dow's declines, losing 1.8%.

The S&P 500 advanced 20 points to 1,547, and the Nasdaq Composite gained 39 points to 2,741, trading at its highest levels since February 2001.

Volume on the New York Stock Exchange topped 1.4 billion shares, and advancing stocks outran decliners by more than 3 to 1. On the Nasdaq, 1.9 billion shares exchanged hands, with advancers outpacing decliners by more than 2 to 1.

"Investors are making a decisive bet on Corporate America. The optimism is based on the view that earnings can improve and support higher share prices despite all of the problems that created so much volatility during the summer," said Frederic Ruffy, analyst at Optionetics.

"Of course, when money managers find themselves under-invested and shorts are caught, the path of least resistance is up. I've seen this movie before and I don't have Tivo," said Elliot Spar, option/market strategist at Stifel Nicolaus & Co.

A gauge of manufacturing activity came in below expectations, but investors appeared to brush the news aside, with the major indexes only adding to their gains after the Institute for Supply Management released its manufacturing index for September. The measure registered a reading of 52.0%, down from 52.9% in August.

The ISM measure "suggest that the factory sector is so far holding up well in the wake of this summer's financial turmoil," said RBS Greenwich Capital analyst Michelle Girard.

Active issues

Dow component Citigroup said it anticipates a third-quarter profit drop of about 60%, blaming this on "dislocations in the mortgage-backed securities and credit markets, and deterioration in the consumer-credit environment." Its stock gained 2.2%.

Shares of UBS AG were up 3.2% after the company said it would take a $3.4 billion hit against third-quarter profit tied to its subprime mortgage exposure. .

Shares of Chicago Mercantile Exchange Holdings Inc. gained 3.6% following CME's upgrade to outperform from market perform by Wachovia.

Shares of Walgreen Co. were off 15%. The retailer said fourth-quarter net income fell to $396.5 million, or 40 cents a share, from $412.3 million, or 41 cents a share, with sales rising to $13.42 billion from $12.17 billion. Analysts had, on average, expected earnings of 47 cents a share on revenue of $13.54 billion.

Acxiom Corp.'s shares fell 19.7% after its deal to be taken private fell through. Suitors agreed to pay the data-management company a termination fee totaling $65 million.

Shares of wireless-phone maker Nokia Corp. gained 0.1% after it agreed to purchase digital-map supplier Navteq Corp. for $78 a share, or $8.1 billion. Shares of Navteq slipped 1.7% .

Alternative markets

On the New York Mercantile Exchange, crude-oil futures edged lower, extending their sharp losses from the prior session, with the December crude down $166 at $80 a barrel. .

Gold futures climbed to their highest point in nearly 28 years, with the contract for December delivey rising $4.10 to finish at $754.10 an ounce. .

Treasurys lost some steam to trade mixed, with the benchmark 10-year note gaining 11/32 to 101 20/32 sending its yield down to 4.545%.

In currencies trade, the dollar firmed against the euro and Japan's yen as stocks rallied. .

Overseas, European markets started the fourth quarter cautiously but rallied higher toward the close, in sync with Wall Street's early gains. .

Asian stocks closed mostly higher, although Japanese shares traded erratically. .

By Kate Gibson