BBC Monday, 21 May, 2001, 22:03 GMT 23:03 UK

Dow soars to 16 month high

The Dow Jones index of leading US industrial companies soared to its highest level in nearly 16 months on Monday.

The technology-dominated Nasdaq index rose nearly 5%, to record its fifth gain in a row to reach its highest level since late February.

The market rebound comes amid growing confidence that the US economy can avoid a full-blown recession.

Investors in the volatile high-tech sector are increasingly confident that the US Federal Reserve's volley of interest rate cuts will boost profits in the coming quarters.

But the Dow's performance - which sees it just 3.3% below its all-time high of 11,722 - is more encouraging for the wider economy.

Economic recovery

Robert S Robbins, chief market strategist at brokerage house Robinson-Humphrey said he expected the trend to continue and the broader Standard and Poor 500 index to be 30% higher by the end of the year.

"This is an extraordinary time where we're likely to see all-time highs coming in a steady advance," he said.

"Defensive issues aren't working today, because we're in a new bull market and you have to be aggressive and risk-taking in a bull market."

US investors are increasingly moving out of safe havens such as consumer goods and pouring money into the technology sector, in the hope that the Fed's aggressive monetary easing will stoke an economic recovery.

The market kicked off its rally last week after the Fed slashed interest rates for the fifth time this year by 0.5%.

On Monday, the Nasdaq composite index shot up about 106.67 points, or 4.85%, to 2,305.55.

'Looking ahead'

Cisco Systems, the world's biggest internet equipment maker, led the tech-packed index higher - rising $2.67 to $22.87 and piercing the $21 mark for the first time since March.

The Dow Jones industrial average gained 36.18, or 0.32%, to 11,337.92.

Walt Disney, which gained $1.68 at $34.28, joined high-tech companies in lifting the blue-chip index.

Investment house Salomon Smith Barney raised its investment rating on the entertainment giant, pointing to potential box-office success of the movie "Pearl Harbour."

The broader Standard & Poor's 500 Index rallied 20.87 points, or 1.62 percent, to 1,312.83, racking up its sixth straight winning session.

John Davidson, chief investment officer at Circle Trust, which manages $8bn said: "People are looking ahead for when earnings are going to turn, because it appears the Fed is insistent on getting the economy moving.

"People believe this is eventually going to work."

Computer chip maker Intel rose $1.14 to $29.90, boosting both the Nasdaq and the Dow.

The company said it had begun shipments of a new series of high speed microprocessors.

Software giant Microsoft rose 70 cents to $68.79.

Network computer maker Sun Microsystems climbed $2.99 to $22.96.

Business software company Oracle jumped $1.82 to $18.10.

Computer heavyweight IBM gained $1.60 to $119.04. Palm Inc. gained 89 cents at $5.94 after Wall Street investment house UBS Warburg upgraded the handheld computer maker, explaining the company was working hard to remedy inventory problems and enter the next fiscal year in better shape.

Pressure on Dow

Consumer products giant Procter & Gamble was down $2.23 at $65.25, putting pressure on the Dow.

P&G said it agreed to buy the Clairol hair-care business from Bristol-Myers for $4.95 billion in a deal that will offer a leading position in the hair-care products market.

Bristol-Myers was off 71 cents at $55.29.

Online music company MP3.com rocketed $1.85 to $4.86.

French media giant Vivendi Universal said on Sunday it will buy its one-time foe for about $372 million in hopes of bolstering its online music business.

-- Anonymous, May 21, 2001