New York: US stocks rose for a third day on Thursday on relief that a ratings cut by S&P in General Electric was just one notch and that no further cuts loomed, while retail sales data showed some stabilization in consumer spending.
Wall Street closed out its best three-day run since the end of November after GE, the ninth-largest company in the S&P 500 and viewed as an economic bellwether, jumped nearly 13% to $9.57. Standard & Poor’s stripped it of its AAA rating, citing the expectation for poor earnings at its finance unit, and assigned a “stable” outlook.
Investors had feared the credit rating downgrade would be deeper or the outlook negative.
“The outlook was stable. That’s very good news,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York. “It wasn’t quite as bad as it could have been.”
Wal-Mart Stores Inc, up 3.1% at $48.94, ranked among the Dow’s top advancers following a government report that showed sales at US retailers fell by an unexpectedly small margin in February.
The Dow Jones industrial average climbed 239.66 points, or 3.46%, to 7,170.06. The Standard & Poor’s 500 Index jumped 29.38 points, or 4.07%, to 750.74. The Nasdaq Composite Index added 54.46 points, or 3.97%, to 1,426.10.
The Dow closed above 7,000 for the first time since 27 February, but remains down 49% from its record close in October 2007.
For the month of March, the blue-chip average is up 1.5%. But the Dow is off 18.3% for the year so far.
For the third straight day, comments from a top banker drove battered bank shares sharply higher.
Bank of America Chief Executive Kenneth Lewis said the largest US bank was profitable in January and February, and should be able to ride out the recession without any additional help from taxpayers.
Lewis’ comments echoed statements by Citigroup and JPMorgan Chase executives in the two previous trading sessions.
Bank of America’s stock surged nearly 19% to $5.85 and JPMorgan gained 13.7% to $23.20. Citigroup added 8.4% to $1.67. Wells Fargo & Co soared 17.4% to $13.95. The KBW banks index shot up 11.2%.
Biotechs climb on M&A
Investor sentiment also got a lift from a flurry of takeover activity in the biotechnology sector, driving up shares of health-care companies. The Amex Biotechnology index leaped 6%.
On Nasdaq, biopharmaceutical company Gilead Sciences Inc said it will buy CV Therapeutics Inc for about $1.4 billion, stepping in the middle of a hostile bid for CV from Japan’s Astellas Pharma Inc.
Dow component Pfizer advanced 9.6% to $14.02 following news that its drug was effective in slowing a rare type of pancreatic cancer.
Shares of General Motors climbed 17.2% to $2.18 after the automaker said that it will not immediately need $2 billion in emergency funding for March. Shares of Ford Motor added 7.1% to $2.10.
Advancing stocks outnumbered declining ones on the NYSE by about 11 to 1, while on the Nasdaq, more than four stocks rose for every one that fell.