NEW YORK (Reuters) - U.S. stocks rallied on Monday to an all-time high as gains in technology shares pushed the Dow Jones industrial average above 14,000 and the dollar firmed a touch as investors took profits by selling other currencies.
Treasury bonds rose, driven higher by investors unnerved after three of the world’s largest banks warned about the damage to their bottom line by tumultuous credit markets.
As the fourth quarter began with investors optimistic about stock performance, the Dow Jones industrial average .DJI was up 127.62 points, or 0.92 percent, to a record 14,023.25. The index topped 14,000 for the first time since July.
The U.S. stock market's rally helped European stock markets reverse early losses suffered after UBS UBSN.VX said it would write down 4 billion Swiss francs ($3.42 billion) in its fixed-income portfolio and elsewhere stemming from recent credit market tremors.
This will result in a third-quarter loss of 600 million to 800 million Swiss francs, the bank’s first quarterly loss in nine years.
“Today’s news of UBS taking a $3.5 billion hit will remind investors that not all the bad news is out,” said Andrew Brenner, a market analysts with MF Global. “We expect well over $100 billion of losses to be announced from now to mid-October from the financial community here and abroad.”
Citigroup C.N said it expects its third-quarter net income to fall 60 percent. However, shares of this Dow component stock rose 1.84 percent as investors bet that the worst was behind for Citigroup.
Credit Suisse CSGN.VX said its results would be "adversely impacted" by the credit market turmoil added it would remain profitable in the third quarter.
Shares of IBM IBM.N and Intel Corp INTC.O were among the biggest gainers in the U.S. stock market. IBM was up 0.85 percent at $118.80, and hit a fresh 52-week high, while Intel was up 2.17 percent at $26.42.
U.S. stock markets also took comfort in an Institute for Supply Management report that found that while the manufacturing sector had lost some steam it still expanded in September.
Still, the slight decline in the report’s index of national factory activity renewed analysts’ hopes that the Federal Reserve again will have to cut interest rates.
A recent report by Goldman, Sachs & Co said its models show a 40 percent probability of a recession and noted declines in both homes sales and prices accelerated in August.
“Although the Fed’s 50 basis points rate cut last week was a welcome relief for markets, the second leg of the housing market downturn has now begun,” Goldman said.
WEAK DOLLAR MAY AGAIN RALLY OIL
The dollar rose from record lows against the euro, as investors locked in profits by selling other currencies.
The euro was down 0.29 percent at $1.4229 from a previous session close of $1.4271.
The dollar was also up against a basket of major trading-partner currencies, with the U.S. Dollar Index .DXY up 0.34 percent at 77.964 from a previous session close of 77.700.
The dollar index lost 3.8 percent in September, more than doubling its year-to-date fall.
U.S. crude oil futures slipped, extending Friday’s end-of-quarter losses, in what analysts called a technical correction after its recent rush above $80 a barrel.
U.S. light sweet crude oil fell 81 cents, or 1 percent, to $80.85 per barrel.
However, the weak U.S. dollar limited losses, as some of crude oil’s recent rally was driven by investors seeking alternatives to the U.S. currency.
The benchmark 10-year U.S. Treasury note, one of the world’s most desirable assets when markets turn nervous, was up 12/32, with the yield at 4.5432 percent.
The FTSEurofirst 300 .FTEU3 index of top European shares closed unofficially up 0.7 percent at 1561.70.
Japan's Nikkei average .N225 closed up 60.27 points at 16,845.96 after the Bank of Japan's tankan survey showed manufacturers were slightly more optimistic than expected.
Additional reporting by Blaise Robinson in Paris and Jeremy Gaunt in London and Robert Gibbons, Ellen Freilich, Pedro Nicolaci Da Costa, Kevin Plumberg, and Carol Valetkevitch in New York
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