Stocks surged Monday as foreign markets recovered and U.S. investors went on a buying binge.
The Dow Jones Industrial Average climbed 232.31 points, or 3.1 percent, to close at 7,674.39. The blue-chip index now stands within 41.01 points of its close before the stomach-churning 554.26-point plunge Oct. 27.
"Fear has shifted to greed," said Robert Stovall, president of Stovall/Twenty-First Advisers Inc. in New York. "Some investors wish they'd bought more aggressively last week. Those who said they had too much exposure to stocks are now saying they don't have enough."
What investors no longer appear to be doing is worrying too much about what's happening in Southeast Asia. Currency turmoil and plunging global stock prices sparked the slide in U.S. stocks last week. Among the fears was that U.S. companies' profits would suffer if weak Asian economies and devalued currencies reduced foreign demand for U.S. exports.
That remains a potential problem, but things suddenly look rosier overseas. The financial turmoil "is mostly over because the Asian situation seems to be stabilizing," said Edward Yardeni, chief economist at Deutsche Morgan Grenfell in New York.
On Monday, Hong Kong's volatile Hang Seng index jumped nearly 6 percent, and other foreign markets followed the upward trend.
The Hang Seng has made a complete reversal, said Ralph Bloch, chief market analyst for Raymond James & Associates Inc. in St. Petersburg. He says he thinks U.S. stocks also have turned the corner.
"The Hang Seng "drug' us down, so it's "drugging' us back up," he said. "I think we've seen the low."
"After the events of last week, there are three types of investors: bulls, bears and the bewildered," said Alan Ackerman, a market analyst at Fahnestock & Co.
"It's like a yo-yo," said Clearwater investor Sam Titi, a retired engineer. He's still in the market, but he's not optimistic about the rest of the year. "Closer to the end of the year, a lot of people are going to be dumping stocks and funds because of the lower capital gains tax."
Bloch said that, technically, the best thing that could happen to the market would be for stocks to take a breather. "I'd like to see the market move sideways for a while and see volume dry up," he said. "What I don't want to see is a very dramatic short-term run to new highs. That would be very dangerous."
Clearwater market timer William Ferree said he also is looking for a drop in volume and a decline in prices over the next few weeks.
"The recommended strategy now is to allow time for the decline and its reverberations to run their course, watch tests of the 6,900 level (on the Dow) for a possible second leg down and evaluate how the smaller stocks react to tax selling in preparation for a possible turn-of-the-year rally," he said.
But investors weren't acting particularly cautious Monday. The 232-point gain was the third largest in stock market history, although it was not among the Dow's biggest percentage increases. The record point gain, 337.17 points, was set just a week ago in a spectacular rebound from the previous day's record point drop.
"We've recovered from the psychological shocks of last week," said David Hale, global economist at Zurich-Kemper Group in Chicago.
Cynthia Latta, principal U.S. economist at Standard & Poor's DRI in Lexington, Mass., said that investors were "focusing on the positives in the United States instead of the negatives abroad."
A series of reports also gave investors more bright news about the seemingly invincible U.S. economy. Growth in Americans' personal incomes and spending moderated, and construction spending fell sharply in September, reinforcing the belief that inflation is no threat.
However, a private survey by a group of purchasing managers suggested that manufacturing activity was stronger last month than expected. That news was enough to raise some concerns in the bond market, which was under pressure from the reversal in the stock market. Last week investors fled stocks for the relative safety of bonds. This week they are trading their bonds in for stocks.
"Money's flowing right out of bonds and into stocks," said Alan Day, a money manager at Stratevest Group in Burlington, Vt.
In addition, the government is planning to sell $62-billion in Treasury securities this week in its quarterly refinancing of the national debt. That will bring new supply into the market at a time of what looks to be falling demand.
The yield on the benchmark 30-year Treasury bond climbed to 6.22 percent Monday.
More economic news is due out later this week, including reports on factory orders, jobless claims, job creation, wholesale inventories and average hourly earnings.
_ Information from Times wires was used in this report.