Stocks surge as financials jump
NEW YORK (AP) – The Dow Jones industrials climbed back above 10,000 Wednesday after investors had second thoughts about the heavy selling in the stock market during the past two weeks.
Stocks soared and the Dow rose 275 points after a modest gain Tuesday. It was the market’s first back-to-back advance since mid-June and the first close above psychological benchmark of 10,000 since June 28. But analysts warn that the buying doesn’t mean that investors are more optimistic. They said there wasn’t a single catalyst behind the move and that it looked like a case of investors scooping up stocks that had become cheaper after heavy losses. The Dow had fallen 7.3 percent over two weeks.
“It’s just more of a reaction to a little bit too much negativity,” said Marc Harris, co-head of global research for RBC Capital Markets in New York.
The Dow and broader indexes gained more than
2 percent. Trading volume was light, however, signaling that many skeptical investors were staying out of the market. Interest rates rose as some investors dumped Treasurys in favor of riskier assets like stocks.
The Dow rose 274.66 to 10,018.28 .
The index hasn’t risen two straight days since June 17-18.
Financial stocks rose on an upbeat profit forecast from State Street Corp. The stock gained 9.9 percent. Materials stocks rose after having logged steep drops over worries about the economy. Aluminum producer Alcoa Inc. climbed 3.3 percent, while U.S. Steel rose 5.7 percent.
Wednesday’s big gain fit into a pattern of volatility that began in late April, when the Dow began tumbling from its 2010 high of 11,205.03. The Dow had fallen 13 percent since then, and the long slide included many triple-digit moves.
The protracted drop began on concerns that debt problems in Greece and other European countries would stifle the continent’s recovery and eventually the recovery in the U.S. But in the past few weeks, stocks have been tumbling on signs that the domestic rebound is slowing. Some traders were selling on fears that the country is headed back into recession. They were also buying Treasurys so they could put their money into a safe place.
Jack Ablin, chief investment officer at Harris Private Bank in Chicago, said that what’s called a “double-dip” is unlikely, but the idea of one is scary because the government wouldn’t have many options to revive the economy a second time.
“When you’re driving around on a spare tire you’re on the lookout for nails,” he said.
There were no economic reports to influence the market on Wednesday. Traders were getting a series of reports Thursday likely to give some insight into consumers’ behavior. The government’s weekly report on jobless claims is due out, and retailers will report June sales results. Investors will be looking for any signs that layoffs are slowing, and that consumers are feeling better about spending.
The market’s other big concern is upcoming earnings reports. Investors want to know if companies are also seeing business slow, and if they’re changing their forecasts for the coming quarters.
Ablin said the forecast from State Street bolstered confidence ahead of earnings for the April-June period. However, Ablin said he didn’t expect the bounce to continue because investors are anxious about the hundreds of company reports still to come.
“I don’t think any investor wants to commit one way or another with the whole string of earnings announcements” ahead, Ablin said.
The Standard & Poor’s 500 index rose 32.21, or 3.1 percent, to 1,060.27, and the Nasdaq composite index rose 65.59, or 3.1 percent, 2,159.47.
Bond prices fell, driving up interest rates. The yield on the 10-year Treasury note rose to 2.99 percent from 2.94 percent late Tuesday. The yield fell below 3 percent last week for the first time since April 2009. The 10-year yield is used as a benchmark for interest rates on consumer loans and mortgages.
The dollar fell against other major currencies, including the euro.
Crude oil rose $2.09 to $74.07 per barrel on the New York Mercantile Exchange. Gold rose.
State Street rose $3.29, or 9.9 percent, to $36.63. Alcoa advanced 34 cents, or 3.3 percent, to $10.55, while U.S. Steel rose $2.17, or 5.7 percent, to $40.39.
About six stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.3 billion shares, in line with Tuesday.
The Russell 2000 index of smaller companies rose 21.63, or 3.7 percent, to 611.66.
Overseas markets closed higher after sliding in early trading. Investors awaited a Thursday meeting of the European Central Bank. Traders are expecting the bank to keep interest rates unchanged, but will want to get details on the European Union’s “stress tests” of bank balance sheets. The notion that the examination could be more rigorous than first thought helped U.S. stocks and drove the euro higher. Similar tests of U.S. banks in May last year helped bolster confidence in the financial system by reassuring investors that big banks likely would survive a deeper slide in the economy.
Britain’s FTSE 100 rose 1 percent, Germany’s DAX index rose 0.9 percent, and France’s CAC-40 climbed 1.8 percent. Japan’s Nikkei stock average fell 0.6 percent.