US markets make strong comeback
US stocks posted strong gains for a second day yesterday as investors jumped back into beaten-down financial shares and backed away from safer assets like gold in volatile trading.
The stock market swung back and forth as investors anticipated a key speech from Federal Reserve chairman Ben Bernanke on Friday. There had been hope the Fed chief would hint of stimulus to aid the struggling economy, but a more likely outcome is for gradual measures.
“Some investors have been buying because it feels, looks like perhaps we’ve seen the lows of the correction,” said Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany, New York. “[But] savvy investors don’t expect QE3. They do not expect the Federal Reserve to unveil anything significant.”
The Dow Jones industrial average was up 142.51 points, or 1.28 per cent, at 11,319.27. The Standard & Poor’s 500 Index was up 15.19 points, or 1.31 per cent, at 1,177.54. The Nasdaq Composite Index was up 21.63 points, or 0.88 per cent, at 2,467.69.
The S&P has risen for three straight sessions. Bank of America rose 11 per cent to $6.99, reversing losses on Tuesday when the Dow component hit a two and a half year low on fears it may have to raise large amounts of capital. BofA shares are still down more than 30 per cent so far this month.
The S&P financials index advanced 2.8 per cent, with JPMorgan Chase shares up three per cent at $35.83.
Traditional value stocks such as CVS Caremark and Time Warner were among the day’s top gainers. CVS shares rose 3.1 per cent to $34.44 and Time Warner gained 3.3 per cent to $29.84.
Bernanke is due to address central bankers at an annual symposium in Jackson Hole, Wyoming on Friday. His speech last year laid the groundwork for the Fed’s unprecedented $600bn bond buying program, known as quantitative easing, or QE2, to revive a sputtering US economy.
Exchange-traded funds tracking gold stocks and gold-mining stocks fell after bullion futures dropped more than five per cent in the metal’s worst one-day loss since 2008. The SPDR Gold Trust Index declined 3.3 per cent, while the Market Vectors Gold Miners Index fell 2.5 per cent.
The CBOE Volatility index, Wall Street’s fear gauge, fell but remained at high levels, and investors preferred buying traditional value stocks, suggesting there was caution in the market.