October 26, 2004
By Megan Davies
Yahoo Business
NEW YORK (Reuters) - U.S. stocks surged on Tuesday, as battered insurers rose on confidence a probe of the industry would end quickly, helping blue chips snap a 5-day streak of losses.
Home builders' shares also rose, with Pulte Homes Inc. up nearly 6 percent a day after saying it expects 2005 profit from continuing operations to surpass analysts' average forecasts.
The Dow Jones industrial average was up 138.49 points, or 1.42 percent, at 9,888.48. The Standard & Poor's 500 Index was up 16.29 points, or 1.49 percent, at 1,111.09. The technology-laced Nasdaq Composite Index was up 14.75 points, or 0.77 percent, at 1,928.79.
It was the Dow's biggest jump since June 7.
Marsh & McLennan the world's largest insurance broker, shot up more than 9 percent, or $2.45 to $28.87 after Jeffrey Greenberg resigned as the company's chairman and chief executive and New York Attorney General Eliot Spitzer said he would not press criminal charges against Marsh.
American International Group Inc. climbed 7.5 percent, or $4.23 to $60.33 a day after saying it intends to seek a "prompt resolution of outstanding issues" with the U.S. Securities and Exchange Commission and Department of Justice.
The insurance sector has really helped the blue chips ... that got the ball rolling in the right direction for the Dow," said Evan Olsen, head of equity trading at Stephens Inc.
Home builders, mortgage bankers and other interest-rate sensitive stocks rose as U.S. Treasury debt yields held near 7-month lows after an index of consumer sentiment in October fell more than expected, adding to concerns about the economy.
The yield on the benchmark 10-year note was below 4 percent for a second straight day.
"Lower interest rates help all stocks, but they especially help stocks like Home Depot and others with a lot of debt," said Tom Schrader, managing director at Legg Mason Wood Walker.
Home builders were among the top performing groups, with the Dow Jones home builder index up 3.5 percent.
Mortgage companies gained, with Fannie Mae up $2.26 at $69.13 and Countrywide Financial Corp up $1.23 at $32.62.
Home Depot Inc. gained more than 2 percent, up $1 to $39.67. Pulte was up $3.02 to $54.52.
The strong gains came despite a rise in crude oil futures , which settled up 63 cents at $55.17, close to their $55.67 record high on Monday.
"Oil prices are back up today and people are shrugging that off. We've dealt with $55 oil," said Olsen.
But technology stocks, which have performed better than blue chips since the beginning of the month, lagged. Investors were rotating funds out of the sector, Olsen said.
Qualcomm Inc. also weighed on the Nasdaq, falling 4 percent to $39.50 after Morgan Stanley lowered its rating on the company to "underweight."
Investors were cautious ahead of the Nov. 2 presidential election, traders said. In addition to speculating over the winner, investors are worried about a repeat of 2000's drawn-out conclusion.
Trading was active, with 1.7 billion shares changing hands on the New York Stock Exchange, above the 1.4 billion daily average for last year. About 1.8 billion shares were traded on Nasdaq, above the 1.69 billion daily average last year.
Advancers outnumbered decliners on the NYSE by about 12 to 5, and 3 to 2 on Nasdaq. (Additional reporting by Anupama Chandrasekaran, Chris Sanders and Jonathan Stempel)
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