Recovery bets lift Wall Street, eyes on the Fed

Recovery bets lift Wall Street, eyes on the Fed
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First Published: Wed, Sep 23 2009. 08 38 AM IST
Updated: Wed, Sep 23 2009. 08 38 AM IST
New York: US stocks rose on Tuesday, as investors bet the US Federal Reserve will stick to its accommodative policy to foster economic recovery, boosting growth-sensitive sectors such as financials, technology and industrials.
The gains were broad-based, with all but three of the 10 S&P 500 industry sectors ending higher. Energy and other natural resources stocks were underpinned by resurgent global commodity prices as the US dollar retreated.
The Federal Reserve began a two-day policy-setting meeting on Tuesday. Its policy statement is due on Wednesday around 1815 GMT.
With no change expected in interest rates, investors probably will focus on the bank’s assessment of the economic outlook, particularly after chairman Ben Bernanke said last week that the recession was “technically” over.
“Bernanke’s research will have him staying the course here, in an accommodative fashion for a bit longer, and I think the market very much believes that and is trading off of that,” said Dean Curnutt, president of Macro Risk Advisors, an equity derivatives strategy and execution brokerage, in New York.
“Ultimately, the extent to which the Fed is accommodating this market needs to be unwound, and we’ll see if we hear more on that tomorrow. Our sense is that there will not be a tremendous amount” of information on that topic.
The Dow Jones industrial average gained 51.01 points, or 0.52%, to end at 9,829.87. The Standard & Poor’s 500 Index rose 7.00 points, or 0.66%, to 1,071.66 -- a fresh 11-month closing high. The Nasdaq Composite Index climbed 8.26 points, or 0.39%, to 2,146.30.
The S&P 500 has risen 58.4% since hitting a 12-year closing low on 9 March.
CITIGROUP CLIMBS, AIG SLIDES
Among financials, Citigroup shares jumped 5% to $4.65 following news that Singapore wealth fund GIC has cut its stake in the US banking company in half.
Bank of America rose 2.1% to $17.61 after Rochdale Securities analyst Richard Bove raised his price target on the stock, citing the bank’s strengthened financial condition.
The S&P 500 financial index was up 2.3%.
But insurer American International Group bucked the positive trend, falling 5.4% to $45.80 amid speculation it was planning to sell shares in a secondary offering. The stock had climbed as much as 12.4% to an intraday high of $54.39 before a late-afternoon reversal.
On the technology front, Google Inc was a particular standout, hitting an intraday high of $501.99 -- its highest level since August 2008. Google’s stock ended up 0.4% at $499.06 on Nasdaq.
On Tuesday morning, Canaccord Adams technology analyst Jeff Rath raised his price target on Google’s stock to $560 from $480, saying, “Our recent checks suggest that ad budgets are coming back, particularly in e-commerce.” He rates the stock a “buy.”
Carnival Corp & Plc lifted its 2009 earnings forecast and said ticket prices for its cruises were stabilizing, sending the shares of the world’s largest cruise operator up 4.8% to $33.52.
Among industrials, Caterpillar Inc shot up 3.6% to $54.34.
Among commodity plays, Newmont Mining added 1.8% to $45.22, and Alcoa Inc rose 2.3% to $14.26. Signs that the US Treasury’s $43 billion auction of new two-year notes met strong demand added to the positive tone.
Investors have scrutinized auction results closely this year, especially after worries surfaced back in May about the longevity of the United States’ prized AAA credit rating.
The US dollar’s slide to a one-year low against the euro helped propel global commodity prices higher, with US front-month crude up 2.6%, or $1.84, to settle at $71.55 a barrel, while spot gold rose toward an 18-month high approaching $1,020 an ounce.
Volume was moderate, with about 1.27 billion shares changing hands on the New York Stock Exchange, compared with last year’s estimated daily average of 1.49 billion. On the Nasdaq, about 2.51 billion shares traded, above last year’s daily average of 2.28 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 5 to 2, while on the Nasdaq, about five stocks rose for every four that fell.
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First Published: Wed, Sep 23 2009. 08 38 AM IST
More Topics: Markets | USA | Stocks | Dow Jones | S&P |