New York: US stocks rose on Wednesday after housing and factory data, along with a Federal Reserve report, lifted hopes the US recession is easing even as other news showed the global economy is still contracting, which boosted the allure of the safe-haven dollar.
Oil fell marginally as declining consumer demand pushed the level of US crude stocks last week to their highest since September 1990. But inflation fears and bullish sentiment in US stock markets kept prices from falling further.
While investors took heart from the glimmer of hope offered by different reports, government data and corporate news from around the world also provided a sobering economic outlook.
US Treasury debt prices mostly gained on data showing US industrial output shrank more than expected in March amid nary a whiff of inflation.
Germany’s wholesale prices suffered their biggest fall in 22 years and on Thursday, China is poised to report its slowest quarterly growth in nearly two decades. That could dampen hopes it can lift the rest of the world out of recession.
All three major US stock indexes turned positive in late trading in a choppy session.
The Fed said the US economy continued to weaken in March and early April, but the speed of contraction was fading amid scattered signs the country’s recession may be nearing an end.
“The Beige Book is feeding into the whole general picture of the market,” said Carl Birkelbach, chairman and chief executive of Birkelbach Investment Securities in Chicago, referring to the Federal Reserve’s monthly compilation of anecdotal information from the US central bank’s business contacts.
“It indicated that there would be negative things out there, but it also used the word ‘bottoming,´ and that was positive,” Birkelbach said.
Shares of major US homebuilders surged after the National Association of Home Builders said sentiment rose in April to the highest level since last October.
The NAHB/Wells Fargo Housing Market index increased to 14 from 9 in March, pushing the Dow Jones U.S. Home Construction Index up 6%.
American Express Co said US credit card defaults rose slightly in March, suggesting that after months of deterioration, consumers’ ability to pay bills is stabilizing.
Another sign of hope came in a separate Fed report that showed manufacturing activity in New York state contracted less severely in April after hitting a record low the previous month.
The Dow Jones industrial average gained 109.44 points, or 1.38% to 8,029.62. The Standard & Poor’s 500 Index rose 10.56 points, or 1.25%, to 852.06. The Nasdaq Composite Index added 1.08 points, or 0.07%, to 1,626.80.
The dollar rose against a basket of major currencies, with the US Dollar Index up 0.10% at 84.88.
Against the yen, the dollar rose 0.6% to ¥99.35, well above session lows of ¥98.15. The euro fell 0.2% to $1.3221.
European shares closed lower, with UBS leading banks down, while oils and miners also fell. The FTSEurofirst 300 index of top European shares fell 0.2% to close at 788.21 points.
Oil fell slightly after US crude oil stocks rose last week to their highest level in nearly two decades.
Weekly fuel supply data from the world’s top energy consumer showed a 5.6 million barrel rise in crude stocks last week, almost three times the build of 1.9 million barrels that analysts polled by Reuters had expected.
“Another week, another bearish inventory report,” said Tom Bentz, senior commodity analyst at BNP Paribas Commodity Futures Inc. “It’s been negative week after week and yet the market hasn’t collapsed.
“It’s defying fundamental logic, focusing instead on the dollar, the strength in the stock market and inflation fears -- that’s what’s keeping the oil price up.”
Gold rose slightly as strong physical demand from top bullion consumer India offset worries due to a surprise drop in US consumer inflation, which could dent the metal’s allure as an inflation hedge.