Dow surges to close at a two-year high
US stocks cut gains to end mostly flat after a late-day sell-off yesterday as yet another cautious statement from the Federal Reserve on the economy offset strong retail sales data for November.
The Dow Jones industrial average was up 47.98 points, or 0.42 per cent, at 11,476.62 – its highest close since 8 September 2008. The Standard & Poor’s 500 Index was up 1.13 points, or 0.09 per cent, at 1,241.59. The Nasdaq Composite Index was up 2.81 points, or 0.11 per cent, at 2,627.72.
With trading volume still anaemic, the afternoon’s drop could be a sign that the major indexes have hit the upper range of a rally that has propelled them all to recent two-year highs.
The Fed, in a policy statement after its last scheduled meeting of 2010, said the economic recovery was still too slow to bring down unemployment and reaffirmed its commitment to buy $600m in government bonds. The move pushed bond yields sharply higher and pressured financial shares, which are hurt by higher rates.
“I’m slightly disappointed that the (Fed) doesn’t see the world in the same light that investors do,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group.
The PHLX KBW Bank Index lost 1.5 per cent. Recent winners, such as Regions Financial and Marshall & Ilsley, led losers, falling 5.3 per cent and 3.4 per cent respectively.
US retail sales rose for a fifth straight month in November, pointing to a firm rebound in consumer spending, which accounts for roughly two-thirds of the US economy. But shares of Best Buy plummeted 14.8 per cent after the top US electronics retailer posted a third-quarter profit that missed expectations and cut its full-year profit view.
“The data was encouraging overall and shows that retailers are driving traffic into the stores,” said Liam Dalton president of Axiom Capital Management. “But Best Buy is a reminder that there’s a lot of discounting and market share being pulled in several directions, meaning it could still be a choppy Christmas.”
Financial stocks were the top losers yestesrday, with the group down 0.9 per cent, the biggest drop among S&P sectors. Dow-listed JPMorgan Chase & Co lost 1.7 per cent to $40.79.