New York: Wall Street ended a tumultuous March on a high note, managing its first winning month this year and its best monthly performance in nearly seven years.
Stocks finished off their earlier highs on Tuesday but resumed a three-week rally that has brought the Dow Jones industrials up a total of 16% since hitting their lowest level in 12 years on 9 March.
The Dow rose 7.7% overall in March, its biggest monthly gain since October 2002.
Technology and financial shares led the rally as large investors loaded up on rising stocks in order to report strong holdings at the end of the first quarter, which ended on Tuesday.
Investors shrugged off lackluster economic data and snatched up some of the biggest names in technology and banking including Google Inc., International Business Machines Corp., Bank of America Corp. and Citigroup Inc.
The market is coming off a two-day pullback as stocks took a breather from a recent surge driven by optimism that US banks may be emerging from the worst of a lending crisis.
The government finally delivered details last week of its plans to take failed loans off the books of struggling banks and leaders of several large banks have said they did well in January and February.
Financial services companies are likely to get another dose of good news later this week. The Financial Accounting Standards Board is widely expected to ease accounting rules that require companies to list their assets at current market values.
Banks have had to take massive write-downs over the past two years as the value of mortgage-backed securities and other investments has withered. Banks say a softening of the “mark-to-market” rules would help their bottom lines.
Keith Wirtz, president and chief investment officer at Fifth Third Asset Management in Cincinnati, said the gain in bank stocks on Tuesday was likely boosted by some short-covering in anticipation of a resolution on the rules, as traders don’t want to miss out on a possible rally in financials later this week. Short covering, or the buying of stocks to cover bets that stocks would fall, has played a large role in the surge in bank stocks over the past few weeks.
The Dow Jones industrial average rose 86.90, or 1.2%, to 7,608.92, after earlier rising as much as 203 points. The Standard & Poor’s 500 index gained 10.34, or 1.3% to 797.87, while the technology-heavy Nasdaq composite index rose 26.79, or 1.8%, to 1,528.59.
The advance on Tuesday was also supported by “window dressing” buying as large investors not wanting to end the quarter with large amounts of cash loaded up on stocks they think have good prospects.
“Technology, of all the S&P sectors, is the only one that is up on the year,” said Craig Peckham, an analyst at Jefferies & Co. “If you’re going to try to window dress anywhere on the last day of the quarter, technology is a good place to start.”
Technology shares got a lift on Tuesday from a deal between The Walt Disney Co. and Google that will allow Google’s video site YouTube to show short-form videos from Disney’s ABC and ESPN networks. Disney shares rose 31 cents to $18.64, while Google gained $5.37 to $348.06.
Investors looked past a number of economic reports, including the S&P Case-Shiller index of 20 cities, which showed that US home prices declined by a record 19% in January from a year ago. Separately, a measure of consumer confidence inched up in March after plummeting to historic lows in February.
The market has been in bear territory, defined as a 20% drop from a high, since the fall of 2007. There has been heated debate about whether the market has finally reached a bottom after stocks hit new 12-year lows on 9 March and rallied sharply since.
The major indexes had dropped about 3% Monday as the White House rejected General Motors Corp.’s and Chrysler’s turnaround plans, raising the possibility of an automaker bankruptcy. The administration also replaced GM’s CEO Rick Wagoner with the company’s chief financial officer, Fritz Henderson. In his first press conference as CEO on Tuesday, Henderson said more plant closures are likely as the company works to avoid bankruptcy.