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Oct 1, 2007 
Wall Street shot higher Monday, sending the Dow Jones industrial average into record territory after a weaker than expected report on manufacturing raised hopes that the Federal Reserve will lower interest rates later this month. A big acquisition by Nokia and relief over a profit warning from Citigroup Inc. added to the market’s gains.
The market, already advancing, bounced higher after the Institute for Supply Management said its index of manufacturing activity registered at 52.0 in September, below forecasts for a 53.0 reading. This followed mixed economic readings released in recent weeks that might prompt policymakers to shore up the economy with another cut when it meets at the end of the month.
Investors were also encouraged that the worst might be over for financial institutions that have been squeezed by the recent credit market upheaval. Both Citigroup and Switzerland’s UBS AG issued third-quarter profit warnings, but indicated that the current period might return to normal; that sent financial stocks, pummeled by the markets’ third-quarter turmoil, moderately higher.
Also adding to investor enthusiasm was hope that acquisition activity will pick up after Nokia’s $8.1 billion offer to buy navigation-software maker Navteq Corp. The deal was seen as a signal that corporations are feeling comfortable in making big moves despite recent market turbulence.
In midmorning trading, the Dow Jones industrial average rose 93.72, or 0.67 percent, to 13,989.35. The blue-chip index briefly passed 14,008.70, surpassing its closing record of 14,000.41, set in mid-July.
Broader market indexes also rose sharply. The Standard & Poor’s 500 index rose 9.00, or 0.59 percent, to 1,535.75; and the Nasdaq composite index rose 17.09, or 0.63 percent, to 2,718.59.
The Dow finished a turbulent third quarter with a 3.6 percent gain, after the Federal Reserve eased investor concerns over the credit and housing markets by lowering key interest rates half a percentage point. Investors believed Monday’s manufacturing data raised the prospects for another rate cut when the Fed meets again Oct. 30 and 31.
Bonds moved higher, with the yield on the benchmark 10-year Treasury note falling to 4.56 percent from 4.59 percent late Friday. The dollar was mixed against other major currencies, while gold prices were higher.
A barrel of light, sweet crude fell 89 cents to $80.77 on the New York Mercantile Exchange. This extended last week’s decline on concerns that oil market fundamentals do not support recent high prices.
Citigroup, one of the world’s largest banks, warned quarterly earnings will tumble as it takes more than $3 billion in writedowns for securities backed by underperforming mortgages and loans tied to corporate buyouts. Investors sent shares up 33 cents to $47 on speculation the worst might be over for the bank after Chief Executive Chuck Prince said he expects to “return to normal” during the fourth quarter.
UBS, the largest Swiss bank, reported it would take a pretax loss of up to $690 million in the third quarter due to writedowns related to deterioration in the subprime mortgage market. UBS said the loss will result in the elimination of 1,500 jobs from the bank’s work force of 80,000 by year end.
Shares of UBS rose $2.02, or 3.8 percent, to $55.27.
Credit Suisse Group followed the UBS statement with its own, saying that it expects to report a third-quarter profit of about $860 million despite stormy conditions. Shares of the bank rose $1.41 to $67.74.
Nokia fell 92 cents, or 2.4 percent, to $37.01 after it announced it planned to buy Navteq, whose shares fell $1.77 to $76.21.
The Russell 2000 index of smaller companies was up 10.17, or 1.26 percent, at 815.62.
Overseas, Britain’s FTSE 100 rose 0.59 percent, Germany’s DAX index rose 0.52 percent, and France’s CAC-40 added 1.06 percent. In Asia, Japan’s Nikkei stock average closed up 0.36 percent, while the market was closed in Hong Kong for a holiday.
AP
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