Stocks posted strong gains Monday on hopes that another bleak housing market report will lead to another aggressive rate cut by the Federal Reserve this week.
Traders were pricing in a greater than 80% chance of a half-point rate cut from the Fed when it concludes a two-day meeting on Wednesday. The Fed cut rates by three-quarters of a point last week, its biggest emergency rate cut since 1982, to stem a global panic caused by a meltdown in the U.S. credit markets.
Also this week, traders will have to contend with a number of high-profile earnings reports — Yahoo, Amazon and Google will report after the close on Tuesday, Wednesday and Thursday, respectively — along with the latest government jobs data.
VMware got the earnings reports off to a rough start late Monday when its shares plunged 20% in after-hours trading after the company’s 80% sales growth was less than Wall Street analysts expected. Parent company EMC, which will report its results Tuesday morning, also fell in late trading.
But the rest of the market fared well Monday, with the major indexes erasing much of Friday’s losses on hopes for another Fed ease.
Corning tacked on 3% after beating estimates and raising guidance, and Verizon added 1% on in-line results.
Alliance Data Systems plunged 35% on news that its acquisition by Blackstone Group is likely in trouble.
Yahoo shed 5% ahead of its quarterly report card, and Rediff.com fell 17% after its sales came up short of estimates.
The Nasdaq rose 23 to 2349, the S&P gained 23 to 1353, and the Dow surged 176 to 12,383. Volume declined to 4.1 billion shares on the NYSE, and 2.1 billion on the Nasdaq. Advancers led by a 26-7 margin on the NYSE, and 19-10 on the Nasdaq. Upside volume was 86% on the NYSE, and 70% on the Nasdaq. New highs-new lows were 22-81 on the NYSE, and 45-119 on the Nasdaq.
