New York: US stocks rallied on Thursday on investor hopes that the government’s plan to shore up the financial system will include a change in accounting rules that would stem bank write-downs and spur lending.
Bank stocks reversed losses in late morning to lift the Dow off its lowest level since the bear market low of 21 November.
Bank of America finished up 3%, while JPMorgan rose 2.1% and the S&P financial index rose 1.4%. A solid January sales report from Wal-Mart, coupled with better-than-expected reports from a few other retailers added to the positive tone.
“Anything that helps the banks is helpful for the economy if they can start lending,” said Giri Cherukuri, head trader at OakBrook Investments LLC, which oversees $1.3 billion in Lisle, Illinois. “Wal-Mart news was good, so that also helped.”
The Dow Jones industrial average rose 106.41 points, or 1.34%, to 8,063.07. The Standard & Poor’s 500 Index gained 13.62 points, or 1.64%, to 845.85. The Nasdaq Composite Index climbed 31.19 points, or 2.06%, to 1,546.24.
The S&P 500 is now off 6.4% since the start of 2009, but has risen 12.4% since the bear market low hit in November.
A day before the release of the January non-farm payrolls report, investor sentiment got a boost from talk that Washington would suspend an accounting requirement on the recognition of losses that has resulted in billions of write-downs for banks.
The Obama administration is due to announce its bank rescue plan next week.
There was also encouraging news on the earnings front on Thursday.
Akamai Technologies Inc ,whose technology helps companies run websites and online businesses, posted a quarterly profit and revenue above Wall Street expectations, sending its shares up 18.1% to $16.73 on Nasdaq.
Investors also snapped up shares of technology bellwethers, including Apple and Cisco Systems, as a loosening up of lending would boost both consumer and business spending. Apple added 3.1% to $96.46 to become the Nasdaq’s top boost, while Cisco rose 3.2% to $16.35 after initial disappointment with the company’s revenue outlook for the current quarter dissipated.
Wal-Mart was the top boost to the Dow, jumping 4.6% to $48.56 on the New York Stock Exchange after the discounter posted solid January sales.
Even with Thursday’s rise, financial shares are down 28% so far this year.