NEW YORK (CNNfn) - Records, records and more records were the buzzword on Wall Street Monday. Charged by a rallying bond market, a strong dollar, and a positive outlook on the U.S. economy, bullish investors went on a buying spree, pushing all major market indicators to new record highs.
What some perceived as bullish comments by billionaire investor Warren Buffett helped underpin the market's gains. In his annual letter to shareholders, Buffett said that despite selling about 5 percent of his stock holdings in 1997 and despite a shrinking number of bargains in the market and a lower margin of safety for investors, he did not think U.S. stocks were overvalued as long as interest rates remain low and returns on equity continue to soar. Buffett invests through his company Berkshire Hathaway.
"At the moment there are no concerns on the immediate horizon," said Alfred Kugel, senior investment strategist at Stein Roe & Farnham, who said only a change in the benign inflation situation in the United States could derail the bull market. (237K WAV) or (237K AIFF)
The Dow Jones industrial average rose 116.33 points to close at 8,718.85, crossing the 8,700 mark for the first time and eclipsing its all-time high of 8,675.75 set March 11. Advancing stocks outnumbered decliners 1,804 to 1,152 as 552 million shares changed hands on the New York Stock Exchange.
The Nasdaq Composite rose 16.52 to 1,788.18, setting a new record high. The technology-laden index hit its previous all-time high at 1,777.11 Feb. 26.
The S&P 500 index gained 10.68 to 1,079.27, also a record. The S&P's previous all-time high of 1,069.95 was reached last week on March 12. The Russell 2000 index of smaller companies rose 2.99 to 471.76, a new record beating the previous one set March 12 at 467.78. (Look here for the performance of widely held stocks.)
Bonds also gained, helped by a firm U.S. dollar and tumbling world oil prices. The price of the benchmark 30-year Treasury bond rose 14/32 of a point, lowering the yield to 5.86 percent.
The dollar finished little changed after rallying overnight against the Japanese yen.
The Buffett effect
Most of Wall Street felt encouraged by Warren Buffett's cautiously optimistic comments.
But a flock of Wall Street market players also followed Buffett on the selling trail, ditching shares of McDonald's Corp. (MCD) after the billionaire investor himself unloaded a large portion of his holdings in the fast-food chain. Shares of McDonald's fell 1-5/8 to 53.
Shares of airlines, however, led Wall Street on the way up, spurred by low fuel prices and a positive business outlook for the airline industry. UAL (UAL), the parent of United Airlines, surged 2-7/8 to 92-5/8 after Morgan Stanley upgraded the stock. Meanwhile, AMR (AMR), the parent of American Airlines, soared 4-11/16 to 146-1/4, and Delta Air Lines (DAL) gained 1-15/16 to 123. The Dow transports index rose 72.05 to 3,620.50, also a new record, eclipsing its previous all-time high of 3,575.07, set Feb. 12.
Financial services stocks banked on good news about Dow component J.P. Morgan (JPM), whose shares surged 5-1/8 to 130-1/8 after UBS raised its share price target to 175. Speculation that the Wall Street powerhouse is a potential takeover target also boosted the stock. Citicorp (CCI) rose 3-1/8 to 139-9/16 and Chase Manhattan (CMB) gained 3-1/16 to 128-5/16.
Among the day's other newsmakers, shares of American Bankers Insurance Group (ABI) jumped 3-3/4 to 65-3/4 after Cendant Corp. (CD) raised its bid for American Bankers to $67 a share, or $3.1 billion, exceeding a rival $2.7 billion offer from American International Group (AIG).
But in another deal, shares of 360 Communications (XO) fell 4-3/8, or more than 12 percent, to 31-1/4 after news hit the market that the company will be bought by Alltel (AT) for $6 billion, including $4.2 billion in stock. News reports on Friday had put the stock portion of the deal at $4.8 billion.
Elsewhere, the stock of Ciena (CIEN) gained 3 to 47-7/8 after the company said it has found a client for its next-generation multiplexing system in long-distance phone giant Sprint (FON). Ciena, whose products allow fiber-optic telecommunications cables to carry up to 40 times more data, graphic and voice information, is just about to begin shipping its newest system.
Finally, shares of computer disk-drive maker Iomega (IOM) shed 1-1/2, or more than 17 percent of their value, to 7-1/8 after the company warned of a first-quarter loss of between $10 million and $25 million.
-- by staff writer Malina Poshtova Zang