NEW YORK, (Reuters):
STOCKS SURGED to 18-month highs, but bonds slumped on Monday as news of the fastest pickup in United States (U.S.) factory activity in 20 years reinforced prospects for a sustained U.S. economic rebound.
Gold prices closed above US$400 an ounce for the first time in almost eight years as the dollar remained weak, making the safe-haven metal more affordable to big investors overseas.
In contrast, oil futures ended just below US$30 a barrel, on expectations that the Organisation of Petroleum Exporting Countries will leave production levels unchanged when oil ministers meet on Thursday in Vienna.
The Dow and the Standard & Poor's 500 posted their highest closes since the end of May 2002, while the Nasdaq finished at its highest mark since January 2002.
"Businesses are increasingly convinced this recovery can be sustained, and it won't just be a flash in the pan," said Richard DeKaser, chief economist at National City Corp.
The outlook for the economy was given a boost early in the session as the Institute for Supply Management said its barometer of manufacturing activity surged to 62.8 in November from 57.0 in October, far exceeding economists' forecasts and putting to rest doubts that a manufacturing recovery will be sustained.
A separate report earlier in the day showed that U.S. construction spending jumped an unexpected 0.9 per cent in October, setting a record for a fourth straight month.
The Dow Jones industrial average closed up 116.59 points, or 1.19 per cent, at 9,899.05, its highest close since May 31, 2002. The Standard & Poor's 500 Index ended up 11.92 points, or 1.13 per cent, at 1,070.12, which marked its highest point at any time since June 3, 2002, and its highest close since May 28, 2002.
The technology-focused Nasdaq Composite Index finished up 29.56 points, or 1.51 per cent, at 1,989.82, its highest close since January 15, 2002.
Cyclical stocks, whose fortunes are most closely tied to a strengthening economy, showed the best gains with the Morgan Stanley Cyclical index rising 1.8 per cent to an all-time high.
Forest products company International Paper led the Dow in gains, rallying $1.54, or 4.1 per cent, to $38.75.
Software company Oracle Corp. was among the Nasdaq's leaders, up 49 cents or four per cent at $12.51.
Wal-Mart Stores Inc. was the Dow's biggest loser, dropping $1.14, or 2 per cent, to close at $54.50. The world's biggest company posted record sales on the Friday after the U.S. Thanksgiving Day holiday. But analysts focused on the 6.3 per cent year-over-year sales increase - below the 14.4 per cent jump of a year earlier.
BONDS AND OIL SLIP, GOLD GLITTERS
Among U.S. Treasuries, the benchmark 10-year note fell 13/32 to 98-29/32, to yield 4.39 percent, up from 4.34 percent on Friday.
The two-year note fell 2/32 to 99-18/32, to yield 2.09 percent, up from 2.05 percent on Friday. Yields briefly hit 2.15 percent, the highest since December 2002.
The 30-year bond slipped 10/32 to 103-6/32 for a yield of 5.16 percent, up from 5.13 percent on Friday.
The euro pulled back from its record high of $1.2041 after the data. News that Washington may repeal tariffs on imported steel to head off a trade war proved only a short-term positive for the dollar.
The euro settled at $1.1968, down from $1.1991 on Friday. The dollar slid to 109.36 Japanese yen from 109.60 yen.
COMEX gold for February delivery jumped $5.80 to close at $403.80 an ounce, marking the first time gold futures have closed above $400 an ounce in almost eight years, as the euro rose to a record high. Earlier, February gold hit $404.00, the highest price since February 1996.
On the New York Mercantile Exchange, January crude fell 46 cents to settle at US$29.95 a barrel.
Overseas, London's FTSE Eurotop 300 index of pan-European blue chips closed up 14.94 points or 1.6 percent at 946.17, its best close since Sept. 11, 2002, and just below a new 2003 high of 946.24.
In Tokyo, the Nikkei average soared 302.70 points or 3.00 percent to close at a three-week high of 10,403.27, its biggest one-day rally since Sept. 1.
