Factory data gives boost to US stocks
US stocks rose for a third straight session yesterday with financial stocks leading gains after US manufacturing data and a rebound in Chinese stocks reassured investors.
The Dow and the S&P 500, which suffered their worst day in about seven weeks on Monday, got a lift from signs of improvement in US Mid-Atlantic manufacturing and China’s stock market reversing its 20 per cent drop in the last two weeks. The S&P 500 is now up about 49 per cent from its 12-year closing low set on 9 March.
The positive manufacturing data from the Federal Reserve Bank of Philadelphia offset the market’s disappointment that weekly jobless claims increased for a second week.
“Just the fact that the more important jobless claims were overshadowed by the manufacturing data and rebound overseas shows how much optimism there is in the market now,” said Dan Faretta, a senior market strategist at Lind-Waldock.
Financial stocks contributed the most to the market’s rise, with Citigroup up 8.5 per cent at $4.48 after veteran bank analyst Richard Bove said some investors are betting the stock’s price will triple in three years.
AIG surged 21.3 per cent to $32.30 after newly appointed chief executive Robert Benmosche said the bailed-out insurer may be able to repay its federal debts and boost value for shareholders.
“Investors see financials as having been beaten down too bad, too fast … They link financial stocks with economic recovery, so they want to see the shares move higher.”
The Dow Jones industrial average gained 70.89 points, or 0.76 per cent, to end at 9,350.05. The Standard & Poor’s 500 Index .SPX rose 10.91 points, or 1.09 per cent, to finish at 1,007.37. The Nasdaq Composite Index climbed 19.98 points, or 1.01 per cent, to close at 1,989.22.
The S&P Financial Index was up 2.60 per cent, widely outperforming other sectors, and the KBW Bank index gained 2.87 per cent.
The US earnings picture was mixed as packaged food makers HJ Heinz and Hormel Foods both beat Wall Street’s estimates.