Wall Street powers ahead; Dow tops 9,400 (New 52 Week High

Relieved at a quick bounceback from the nation's worst-ever power outage and bolstered by solid earnings and recent economic news, stocks posted a striking rally today.

The Dow burst through key resistance and ended above 9,412, its highest close since June of 2002. Honeywell (HON, news, msgs) led the way with a 4% gain; other Dow components with big moves included Hewlett-Packard (HPQ, news, msgs), Intel (INTC, news, msgs) and General Electric (GE, news, msgs), all up more than 3%.

Perhaps more significantly, seven of the 30 Dow component stocks hit new 52-week highs: Intel, Wal-Mart Stores (WMT, news, msgs), Caterpillar (CAT, news, msgs), 3M (MMM, news, msgs) )]], Alcoa (AA, news, msgs), International Paper (IP, news, msgs) and United Technologies (UTX, news, msgs). (For a look at all the companies hitting new highs today, click here.)

And it wasn't just the Dow in rally mode. The Nasdaq moved close to its July highs with a gain of 2% as techs surged, while the S&P 500 closed within a whisper of 1,000.

The renewed rally faces a few hurdles tomorrow, with several economic reports and a slew of earnings due out. But for today, things were pretty much all looking up. "We walked in here today expecting a little fallout from the blackout, but if there was any it didn’t last long," Seaport Securities President Ted Weisberg told CNBC. "We have clearly broken out of this trading range."

Powering the move Among the news items helping drive the move up: Wal-Mart Stores, the world’s top retailer, said last week’s blackout will not materially affect sales. In fact, Wal-Mart said that August sales in stores open at least a year could beat its forecast of 3% to 5% growth, helped by strong back-to-school shopping.

Traders were also encouraged that -- despite the blackout, which left much of the Midwest and Northeast without power from Thursday afternoon into the weekend -- stocks held their ground and even made gains. "I think people came in today, decided the market isn't going down and bought the rally," SG Cowen's Todd Leone told CNBC.

The one qualifier: Volume. The market opened despite the blackout on Friday, but trading ran at a crawl. Today it has picked up to the usual (read: slow) levels of a typical summer Monday.

"Volume indicates validity. You wouldn't take a Gallup poll of two people," trader Art Cashin said on CNBC. "Sure, we'll take higher prices. But we'd rather see it happen with higher volume."

CBS MarketWatch
U.S. blue chips end at 14-month highs
Monday August 18, 4:12 pm ET
By Julie Rannazzisi

NEW YORK (CBS.MW) -- Optimistic remarks from a number of retailers brought out the bulls on Wall Street Monday, increasing expectations that consumer spending is gathering steam and sending the Dow to levels not seen in about 14 months.
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Better-than-expected results from Lowe's and positive comments from Wal-Mart spurred gains in the retail sector (CBOE:^RLX - News) .

Technology stocks were also on a roll amid rosy remarks from research firm Gartner, which said evidence points to stronger information technology spending in the second half of the year and to a turnaround for 2004. Only gold and utility shares came under pressure, with the latter smarting from last week's massive power outage in the Northeast.

The Dow Jones Industrial Average (CBOT:^DJI - News) piled on 90 points, or 1 percent, to 9,412. United Technologies, Wal-Mart, Home Depot, Intel, International Paper, Alcoa and Caterpillar all set new 52-week highs.

"The basic industry stocks are leading the way up, which accounts for the outperformance of the Dow [relative to the other market averages]," noted Robert Dickey, managing director at RBC Dain Rauscher. He advises investors to add to positions in the pharmaceutical and energy sectors, which he feels are trading at attractive levels.

Gains in the biotech and chip sectors buttressed the Nasdaq Composite (NasdaqSC:^IXIC - News) , which surged 37 points, or 2.2 percent, to 1,739 while the Nasdaq 100 Index (NasdaqSC:^NDX - News) bulked up 31 points, or 2.5 percent, to 1,284.

The Standard & Poor's 500 Index (CBOE:^SPX - News) jumped 0.9 percent while the Russell 2000 Index (CBOE:^RUT - News) of small-capitalization stocks rallied 1.9 percent.

Volume came in at 1.11 billion on the NYSE and at 1.46 billion on the Nasdaq Stock Market. Advancers raced past decliners by 22 to 11 on the NYSE and by 21 to 10 on the Nasdaq.

"Despite worries about interest rates and the sluggish labor market, there's no real selling pressure out there. Those worries haven't taken stocks down," remarked John Hughes, equity analyst at Epiphany Equity Research.

Volume was the one missing ingredient from the rally, he said, remaining lackluster and thus suggesting the move to the upside was still tentative.

Fund flow tracker Trim Tabs continued to sound a cautious note, telling clients that it remains "fully bearish" on stocks given the high amount of insider selling by U.S. companies and the lackluster amount of buyback activity.

Lowe's, Home Depot rise; Utilities slip
Home improvement retailer Lowe's (NYSE:LOW - News) climbed 4.6 percent after checking in with a second-quarter profit that flew past analysts' consensus estimates. For the full year, the company provided earnings-per-share projections that were higher compared with Wall Street's current forecast. Still, Raymond James downgraded the company to a "market perform" rating from a "strong buy," citing valuation fears.

Rival and Dow component Home Depot (NYSE:HD - News) will unveil its second-quarter results on Tuesday, with Thomson First Call projecting a profit of 54 cents a share. The stock rose 1.1 percent in recent exchanges.

Dow stock Wal-Mart (NYSE:WMT - News) gained 1.6 percent after telling investors on its weekly sales call that August same-store sales are tracking at the "high end" of its 3 percent to 5 percent forecast range thanks to a solid showing in back-to-school sales. The retailing colossus said the blackout that struck the Northeast late last week was not expected to have a material impact on sales or earnings. See related story on retail sector .

Checking the pulse of other retailers, Toys R Us (NYSE:TOY - News) headed almost 5 percent higher after posting its second-quarter results while AnnTaylor (NYSE:ANN - News) put on 1 percent following an upgrade from UBS to a "buy" rating from a "neutral" on belief the company's second-half outlook is promising.

In other analyst actions, Raymond James lifted its view on Walgreen (NYSE:WAG - News) to a "market perform" from an "underperform," citing the company's recent sales acceleration, but downgraded CVS Corp. (NYSE:CVS - News) to a "market perform" from an "outperform." Walgreen rose 1.8 percent while CVS shaved 0.4 percent in recent exchanges.

Gap (NYSE:GPS - News) and Kohl's (NYSE:KSS - News) were two rare retailers trading in the minus column following downgrades from Wedbush Morgan and Sanford Bernstein, respectively. Kohl's fell 1 percent and Gap shed 0.9 percent.

Utility shares were under the gun, with FirstEnergy (NYSE:FE - News) sliding over 10 percent amid claims it was to blame for last week's blackout. The stock was also downgraded by Merrill Lynch to a "neutral" from a "buy."

The shares of alternative fuel companies such as Plug Power (NasdaqNM:PLUG - News) and FuelCell Energy (NasdaqNM:FCEL - News) continued to surge as investors bet the group would benefit from the blackout's repercussions.

Caterpillar put on almost 2 percent after Prudential lifted its earnings estimate on the Dow component (NYSE:CAT - News) because of higher demand expectations for North American machines.

Protein Design Labs (NasdaqNM:PDLI - News) headed 2.9 percent higher after plunging over 25 percent on Friday amid a tussle with Genentech (NYSE:DNA - News) regarding licensing payments for a new asthma therapy. SG Cowen downgraded PDLI to a "market perform" rating from an "outperform" as a result of the dispute.

Chips rise as AMD soars
A favorable mention in the latest issue of Barron's took the shares of Advanced Micro Devices (NYSE:AMD - News) almost 11 percent higher. Rival Intel sprinted 3.2 percent.

Market research firm Gartner had some upbeat comments on the semiconductor sector, indicating that market conditions for the group have "improved markedly" over the past few weeks and that the sector is poised to enter a more accelerated growth phase. The Philly Semiconductor index (Philadelphia:^SOXX - News) climbed a hefty 4.3 percent.

Smith Barney also had some optimistic comments on the chip sector, noting that better PC demand, signs of improvement in the wireless industry and better order trends are pointing to steadier demand beyond the third quarter.

Still, Smith Barney said high valuations remained one of the biggest negatives for chip stocks and advised investors to "not chase the group" at current levels. One stock that, according to the firm, still sports an attractive valuation is LSI Logic (NYSE:LSI - News) , which was upped to an "in-line" rating from an "underperform." Shares firmed 6.3 percent. See Ratings Game.

Hewlett-Packard (NYSE:HPQ - News) ran up almost 4 percent following an upgrade from A.G. Edwards to a "buy" rating from a "hold" on belief the Dow component's enterprise business is stabilizing. H-P is poised to post its fiscal third-quarter results on Tuesday.

Qwest Communications (NYSE:Q - News) jumped 3 percent after telling investors it remains "on track" to meet its previously-stated financial outlook for 2003.

In merger news, DRS Technologies (NYSE:DRS - News) announced an agreement to acquire defense contractor Integrated Defense Technologies (NYSE:IDE - News) for $550 million in cash and stock, including debt. DRS fell 10 percent while Integrated Defense Technologies jumped over 14 percent.

In other hookups, Patterson Dental Co. (NasdaqNM:PDCO - News) announced an agreement to buy privately-held rehabilitative supplies distributor AbilityOne Products for $575 million. Patterson rose 5 percent.

Read Movers & Shakers for the latest individual stock action.

Treasurys mostly higher; Univ. of Mich upbeat on economy
Most Treasury issues ended higher, with longer-maturity securities attracting brisk buying interest.

The 10-year Treasury note was up 15/32 to yield (CBOE:^TNX - News) 4.47 percent while the 30-year government bond gained 22/32 to yield (CBOE:^TYX - News) 5.35 percent.

The University of Michigan's annual economic forecast revealed expectations for "robust growth" in the second half of 2003 and throughout 2004.

Economists at the University believe accomodative interest rate policy from the Federal Reserve, coupled with expansionary federal tax policy and a string of upbeat data on consumer sentiment, retail sales and initial jobless, suggest a recovery is underway. The University of Michigan expects gross domestic product to increase 4 percent in the second half of 2003 and 4.5 percent next year.

No economic reports were set for release on Monday in a week that'll be extremely light on that front. Among the highlights: July housing starts and building permits; the August Philadelphia Fed survey; weekly initial claims; and the University of Michigan's Consumer Sentiment index.

In the currency market, the U.S. dollar headed higher against its major trading partners. The greenback rose 0.3 percent to 119.48 yen and the euro lost 1 percent to reach a one-month low of $1.1146.

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