Dow up 391 as financial stocks rebound

Yes, it's April Fools' Day. But we not making up what happened in the stock market today. There was a very big rally that startled many traders and left investors wondering if the market will continue to move higher.

At today's close, the Dow Jones industrials were up 391 points, or 3.2%, to 12,654. The Standard & Poor's 500 Index was up 47 points, or 3.6%, to 1,370, and the Nasdaq Composite Index had added 84 points, or 3.7%, to 2,363.

The Dow enjoyed its third-biggest point and percentage gains of the year. And Standard & Poor's said today was the best opening day for a second quarter since 1938. Volume was stronger than average: 1.7 billion shares on the New York Stock Exchange and 2.1 billion shares on the Nasdaq system.

It was a splendid start to a new quarter, especially after the U.S. stock market finished the first three months of the year with its worst losses since the third quarter of 2002. The Dow was down 7.6% for the first quarter, and the Nasdaq down 14.1%. The broader S&P 500 lost nearly 10% in the quarter.

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While the first day of any quarter usually brings new money into the market, there was talk that the rally is a signal that end of the stock market's big sell-off since October is done. Some confirmation may come after Wednesday's close when Research In Motion (RIMM, news, msgs) reports fiscal-fourth-quarter earnings. The consensus estimate is 70 cents a share, up more than 100% from a year ago. Research In Motion was up 4.7% today at $117.48 and is up 46% since bottoming in January.

All 30 Dow stocks were higher, led by Citigroup (C, news, msgs), up 11.3% to $23.84. In addition, 486 S&P 500 stocks had gains, led by Fannie Mae (FNM, news, msgs), up nearly 20% to $31.58, and 98 stocks in the Nasdaq-100 Index ($NDX.X) were higher, led by Chinese Internet company Baidu.com (BIDU, news, msgs), up 14% to $273.25.

• Video: Bulls should be skeptical about the rally

Even Ford Motor (F, news, msgs), which reported a 14% drop in sales for March, saw its shares rise 4.4% to $5.97.

"The market's getting a little more comfortable that the crisis is over," said Henry Herrmann, CEO of mutual fund company Waddell & Reed Financial in Kansas City, Mo., in a bit of understatement.

Lehman Bros., UBS start the party

The big U.S. rally was started by Lehman Bros. (LEH, news, msgs), which announced late Monday it was about to sell $3 billion in new convertible stock. The investment house said this morning that it had raised the amount of the offering to $4 billion at terms that Wall Street seemed to think weren't terribly onerous. Lehman has been under scrutiny since Bear Stearns (BSC, news, msgs) hit the skids last month.

Result: Lehman Bros. was up 18% to $44.34. Amazingly, that's only Lehman's second-largest gain this year. The biggest came on March 18, when the stock was up 46% after the Federal Reserve cut its key interest rate to 2.25%.

• Video: A cautious bull explains his bullishness

The Lehman news was a big relief, traders said. "If you can raise the capital and take care of things, it takes off the table the collapse worries," Bill Stone, chief investment strategist at PNC Wealth Management, told CNN Money.

In addition, short sellers, who had built up huge interests in recent weeks, were taking profits or were being forced to settle their speculations. That means they had to buy back shares they'd borrowed, adding to the day's buying pressure. That helped a beaten-down stock like Google (GOOG, news, msgs), which jumped 5.7% to $465.71. The gain added 4 points to the Nasdaq-100 Index.

Lehman wasn't the only investment house raising cash today.

UBS AG (UBS, news, msgs), Switzerland's biggest bank, also said it was raising $15 billion to shore up its capital position after announcing another huge loss. UBS was up 15% in New York to $33.01.

Deutsche Bank (DB, news, msgs), Germany's largest, announced a $4 billion write-down, but traders pushed the stock up 4.2% in New York to $117.75.

The news from Lehman, UBS and Deutsche Bank set off a huge rally in U.S. financial stocks as Wall Street toyed with the idea that the sector is close to bottoming if it hasn't bottomed already.

The Philadelphia Banking Sector Index ($BKX) was up 7.5%, and the Amex Securities Broker/Dealer Index ($XBD.X) added 8.5% this afternoon.

Right behind Citigroup among the 30 Dow stocks was JPMorgan Chase (JPM, news, msgs), up 9.4% to $47.

In addition, Merrill Lynch (MER, news, msgs) soared 13% to $46.02, and Morgan Stanley (MS, news, msgs) jumped 6.9% to $48.85.

"You also have a record level of cash in money-market funds -- cash on the sidelines -- coupled with huge levels of short interest," said Chris Conefry, a trader at Madison Prop Trading. "If investors start to feel comfortable that there's no other shoe to drop with one of the banks, you may see some value start to be recognized in some of the beaten-down financial names."

While European stocks rallied, the dollar shot up 1% against the euro, 0.4% against the British pound and 2% against the Japanese yen. The U.S. Dollar Index, which tracks the dollar against a basket of currencies, was up 1.1% to 72.97.

Gold, meanwhile, was battered, falling $33.70, or 3.7%, to $887.80 an ounce in New York. Since peaking at $1,033.90 in March, gold is down nearly 12%.

Crude oil finished at $100.98 a barrel in New York, down 60 cents on the day. The biggest drop among energy commodities was with natural gas, down 3.7% to $9.724 per million British thermal units

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$100.98	$101.58	-$0.60	-0.59%	5.21%
Heating oil (per gallon)	$2.8797	$2.9061	-$0.0264	-5.56%	8.69%
Natural gas (per million BTU)	$9.7240	$10.1010	-$0.3770	-3.73%	29.95%
Unleaded gasoline (per gallon)	$2.6392	$2.6271	$0.0121	0.88%	5.96%

Better-than-expected data

The Institute for Supply Management's index on manufacturing activity rose slightly in March, surprising analysts and adding to the positive mood of the markets.

The ISM index rose to a reading of 48.6 from a reading of 48.3 in February. Still, readings below 50 indicate contraction in the sector.

Analysts had expected a reading of 47 for March.

Meanwhile, a report on construction spending was also better than analysts had expected. The Commerce Department said construction spending in February fell 0.3% from January to a seasonally adjusted annual rate of $1.12 trillion.

Analysts had expected a 1% decline in February.

Microsoft unlikely to boost bid

Microsoft (MSFT, news, msgs) is standing firm.

The software giant isn't going to boost its $31-per-share offer for Yahoo (YHOO, news, msgs), The Wall Street Journal reported. Microsoft, which made its $44.6 billion offer for Yahoo on Feb. 1, believes that time is on its side, The Journal said. (Microsoft is the publisher of MSN Money.)

• Video: What's hot in wireless technology

Yahoo officially rejected the bid as too low on Feb. 10, but no white knights have come in with offer that beat Microsoft's bid.

Microsoft shares have fallen over the past two months, bringing the value of the deal to about $42 billion now.

Yahoo shares fell 1.5% to $28.49 this morning -- the worst performer of the four Nasdaq-100 stocks that fell today and third-worst performer among 13 S&P 500 stocks that fell back today. Microsoft was up 4% to $29.50.

Dell to close plant, cut jobs

Dell Inc. (DELL, news, msgs) is shutting down its desktop-manufacturing plant in Austin, Texas.

The computer maker late Monday said that the shutdown will save $3 billion annually over the next three years. The savings will start in the second half of this year, the company said.

Dell also repeated its plans to cut 8,800 jobs around the world. The company said it had already eliminated 3,200 jobs. The plant closing will eliminate 900 jobs.

Dell shares were up 2.1% to $20.33 on the day.

Dell will hold its first analyst meeting in three years on Wednesday.

Short hits from the markets -- 4 p.m.

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.355%	1.275%	0.080	0.37%	-56.85%
5-year Treasury note yield	2.639%	2.467%	0.172	4.10%	-23.62%
10-year Treasury note yield	3.545%	3.432%	0.113	2.28%	-12.14%
30-year Treasury bond yield	4.382%	4.306%	0.076	0.85%	-1.73%
Currencies
U.S. Dollar Index	72.910	72.165	0.745	1.03%	-4.94%
British pound in dollars	$1.9763	$1.9841	-0.0078	-0.38%	-0.65%
Dollar in British pounds	£0.5060	£0.5040	0.0020	0.38%	0.66%
Euro in dollars	1.5627	1.5773	-0.0145	-0.78%	6.92%
Dollar in euros	€ 0.6399	€ 0.6340	0.0059	0.79%	-6.47%
Dollar in yen	¥101.82	¥99.88	1.94	2.01%	-8.97%
Canadian dollar in U.S. dollars	$0.973	$0.975	-$0.0019	-0.44%	-1.97%
U.S. dollar in Canadian dollars	$1.028	$1.025	$0.0029	0.44%	2.03%
Commodities
Gold	$887.80	$921.50	-$33.70	-3.50%	5.94%
Copper	$3.8065	$3.8310	-$0.02	6.52%	25.17%
Silver	$16.8900	$17.3100	-$0.42	0.24%	13.20%
Crude oil (NYMEX) (per barrel)	$100.98	$101.58	-$0.60	-0.84%	5.21%

Delta boosts fees

Delta Air Lines (DAL, news, msgs) is raising fees that will hit frequent fliers, regular travelers, people traveling with pets and fliers who buy tickets over the phone, according to The Associated Press.

Frequent fliers will now have to pay a $25 handling charge for Delta award tickets, if a segment of the flight is on another airline. Any traveler who wants his or her pooch in the cabin will have to pay $100, up from a previous charge of $85, beginning today. And oversized bags will cost passengers $150 now, a $50 increase, the AP wrote.

If kids are flying alone, that will cost $100 on all flights. The unaccompanied minor fee had been $50 for nonstop flights and $100 for connecting flights.

Delta blamed rising fuel prices.

Delta shares rose 6.3% to $9.14 today.