Stocks rallied on Monday, with the Dow closing at an all time high on bets that the big banks are starting to put the worst behind them, and on hopes that the Federal Reserve will continue cutting interest rates. The DJIA closed 191.9 points higher at an all time high of 14087.55. Earlier in the session, the Dow had hit 14115.51, a new record intraday high. The Nasdaq gained 39.49 points to close at 2740.99 and the S&P500 added 20.3 points to end at 1547.05.
Citigroup warned that its third quarter earnings could slump 60 percent because of $3bn in write downs the company had to take due to subprime backed securities. However, the company also said that it was a one time issue and that the current quarter should be better. Also lifting the stock, rumours that CEO Chuck Prince might be forced to step down, or that the company could announce a big restructuring plan.
Similar factors helped UBS, as investors welcomed news of a management shuffle at the bank. Those staffing changes helped take the sting out of the company's warning that it will take a $3.4bn write down in the third quarter and post a quarterly loss, because of subprime related losses.
In economic news, the Institute for Supply Management said its September manufacturing index fell to 52 from 52.9 the previous month.
Oil prices fell Monday, US light crude for November delivery lost $1.42 to settle at $80.24 a barrel on the NYMEX.
COMEX gold for December delivery rose $4.10 to settle at $754.10 an ounce.
Treasury prices inched higher, lowering the yield on the 10 year note to 4.55 percent from 4.58 percent late Friday.
In currency trading, the dollar neared another all time low versus the euro and inched higher versus the yen.
The Nikkei average rose 200.82 points today to close at 17046.78 as Sony Corp gained after saying its financial unit had set its IPO price at the top end of its tentative range. Financial shares rallied as investors bet that the worst of the US subprime mortgage related crisis was over, while exporters such as Canon Inc gained due to a rally on Wall Street the previous session and a softer yen.
UK stocks rose 39.4 points on Monday to close at 6506.2, its highest closing level since July 23 as investors digested the extent of subprime related damage from Citigroup and two Swiss banks and as miners rose. The index was also boosted by an increasing chance of another US interest rate cut by the Federal Reserve after weaker US manufacturing activity data.
Miners gained, contributing 19 points to the index rise, on firmer metal prices and after Credit Suisse raised its target on Vedanta Resources and Kazakhmys, up 4.8 percent and 7.1 percent respectively. Antofagasta, Xstrata and BHP Billiton all climbed as much as 5.3 percent. Anglo American rose 2.2 percent after it said it would sell about half of its stake in AngloGold Ashanti as part of its strategy to focus on core commodities.
Tate and Lyle rose 9.4 percent to top the FTSE100 gainers on speculation of a bid. The company declined to comment.
Northern Rock extended their slide, down 26 percent to around 132p on concerns of sharply discounted takeover bids. The Sunday Telegraph reported the British Treasury had given two US hedge funds permission to start takeover talks with the mortgage lender, one of the worst hit in the UK by the credit crisis. Its stock tumbled nearly 80 percent since its asked for emergency finding from the Bank of England.