Wall Street rallies 3% in broad advance3 min read . Updated: 21 Dec 2011, 09:04 AM IST
Wall Street rallies 3% in broad advance
Wall Street rallies 3% in broad advance
New York: US stocks rallied nearly 3% on Tuesday as investors bought surging banks, homebuilders and networking companies, though low volume was seen as amplifying the market’s move.
The KBW Banks index leaped 4.1% while JPMorgan Chase & Co was up 5% to $32.22 and Wells Fargo & Co added 4.6% to $26.47.
“Investors have been looking for clarity on the regulatory outlook, and I don’t think these rules are so strict that we should expect anything like significant dividend cuts," said Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Inc.
Homebuilders also gained on strong housing figures. The Dow Jones home construction index jumped 6%, led by Pultegroup, the second-largest US homebuilder, up 10% at $6.15, and MDC Holding, up 7.3% at $17.35.
Networking companies completed the grab bag of diverse sectors seeing the biggest gains. Those stocks rallied after AT&T Inc dropped its bid for T-Mobile USA, the Deutsche Telekom unit, as investors anticipate spending on wireless equipment will accelerate.
US-listed shares of Alcatel-Lucent surged 13% to $1.57 and Juniper Networks Inc climbed 9.1% to $19.76. The NYSE Arca Networking index jumped 5.9%. AT&T rose 1.3% to $29.11.
The Dow Jones industrial average was up 335.73 points, or 2.87%, at 12,103.58. The Standard & Poor’s 500 Index was up 35.95 points, or 2.98%, at 1,241.30. The Nasdaq Composite Index was up 80.59 points, or 3.19%, at 2,603.73.
After the market closed, shares of Oracle Corp slumped 7.7% to $26.92 in extended trading. The company reported software and hardware sales that missed its own forecasts.
US housing starts and permits for future construction surged to a 1-1/2 year high in November as demand for rental apartments rose. The news reinforced the view that the US economy will continue to see moderate growth.
Cyclical industries like materials were among the day’s top gainers, though all 10 S&P sectors rose more than 1.5%. Materials climbed 4.1% while energy advanced 4% alongside a 3.6% jump in crude prices.
The day was the best for the S&P 500 since 30 November, and narrowed the index’s losses for the year to 1.3%.
Headlines and fluctuating European bond prices continue to spark high volatility. Stocks will be prone to large swings this week on expected low volume due to the upcoming Christmas and New Year’s Day holidays.
“From a short-term point of view, we were probably due for a bounce given recent losses, but I don’t think we would see a move of this magnitude without the light volume," said Michael Matousek, senior trader at US Global Investors Inc., which manages about $3 billion in San Antonio.
About 6.83 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year’s daily average of 8.47 billion.
Short-term financing costs for struggling Spain more than halved as banks lapped up debt at an auction. The firepower is apparently coming from the European Central Bank’s first-ever three-year funding tender on Wednesday. Investors hope banks will use the cheap funding to buy debt of fiscally troubled EU nations.
Investors have been focused on how the large southern European economies will refinance debt next year if financing costs remain excessively high. Any sign yields may be easing is seen as a positive for markets.
The S&P 500 has gained an average of 1.6% in the last five days of the year and the first two days in January since 1969, according to the Stock Traders Almanac.
The phenomenon is called the Santa Claus rally. Occasions when the market does not rally during those dates often precede a bear market, the Almanac says.
About 86% of stocks traded on the New York Stock Exchange closed in positive territory while four-fifths of Nasdaq-listed shares closed higher.