BackBen Bernanke’s reassurance propels US stocks to record highs
Dow Jones gains 169.26 points to 15,460.92; S&P 500 rises 22.4 points to 1,675.02, closing above its previous all-time high
Premium(Stan Honda/AFP)
New York: The S&P 500 index and the Dow Jones Industrial Average closed on Thursday at record highs, a day after US Federal Reserve chairman Ben Bernanke said the US central bank will keep a loose monetary policy for some time to lower the unemployment rate.
Bernanke said after the market’s close on Wednesday the US jobless rate of 7.6 percent overstated the health of the labour market. He said a “highly accommodative" policy is needed for the foreseeable future, triggering a rally in equity futures.
The S&P closed above its previous all-time high of 1,669.16 on 21 May and the Dow surpassed its high of 15,409.39 on 28 May.
“Having Bernanke come out obviously worked, giving the market some stability," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
“It’s almost as if the markets need to hear this over and over again."
After closing at its previous record, the S&P 500 in June posted its first negative month in eight as Bernanke hinted the US central bank could begin this year to wind down a bond buying programme partly responsible for the rally in stocks.
“The selling that we saw after 22 May was clearly the unwinding of leveraged bets which put tremendous pressure on markets," Krosby said.
More than 85% of shares on the New York Stock Exchange and almost 70% of those on the Nasdaq rose on Thursday. All 10 of the S&P 500 industry sectors advanced, with five of them rising more than 1.5%.
The Dow Jones Industrial Average rose 169.26 points or 1.11%, to 15,460.92. The S&P 500 gained 22.4 points or 1.36%, to 1,675.02 and the Nasdaq Composite added 57.55 points or 1.63%, to 3,578.3.
In late June, the S&P had fallen as much as 5.8% from its closing high after Bernanke’s comments and the expectation of a winding down of the stimulus. Gains have come from improving economic data, anticipation of a better-than-expected earnings season and reduced concern about cuts to the Fed’s $85 billion in monthly bond purchases.
Bernanke’s remarks calmed concerns in the Treasuries market, and stock investors flocked to housing-related stocks on bets on a decline in mortgage rates.
The PHLX housing index jumped 4.9%, its largest daily gain since 20 December 2011.
D.R. Horton jumped 9.2% to $22.98 and at least six other homebuilder stocks rose 7 percent or more.
Advanced Micro Devices Inc. jumped 11.8% to $4.45 and was the S&P 500’s top performer after Bank of America Merrill Lynch upgraded the stock. The PHLX semiconductor index rose 2.1% to its highest in almost six years.
Celgene Corp., up 7.9% to $134.90, was among the top performers for both the S&P 500 and the Nasdaq 100 after the company said a late-stage trial of a cancer drug met the main goal of improving survival in newly diagnosed blood cancer patients.
Microsoft Corp. rose 2.8% to $35.69 after the company announced a reorganization designed to streamline the software company’s operations.
RadioShack Corp. fell as much as 22.6% after trade publication, Debtwire, reported the electronics chain is considering hiring a financial adviser to help improve its finances. Shares closed down 7.1% at $2.63.
Earnings reports are expected on Friday from JPMorgan Chase and Co. and Wells Fargo and Co.
Thomson Reuters data show analysts expect S&P 500 companies’ second-quarter earnings to have grown 2.5% from a year earlier, with revenue up 1.5%.
About 6.5 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, slightly above the 6.4 billion daily average so far this year. REUTERS
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