Wall street
US stocks greeted the new year with a rally yesterday as encouraging signs about the outlook for manufacturing around the world prompted investors to inject new money into the market.
Data from the United States, Europe and China set the tone, helping the Dow and S&P reach new two-year highs and the Nasdaq 100 closed at its highest in nearly 10 years, but some investors think caution may be warranted in the short term.
Financials led the way higher after underperforming the market last year. Bank of America jumped 6.4 per cent to $14.19 after it agreed to pay $2.8bn to mortgage finance giants Fannie Mae and Freddie Mac to settle claims over soured mortgages.
Overall, stocks got a boost from the “January effect” when fund managers are no longer engaged in year-end window dressing and instead focus on stocks they find attractive.
“There is a lot of money in cash, a lot of money in bonds that would like out of bonds, and it’s only natural with the economic improvement it’s finding its way to equities,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
The Dow Jones industrial average gained 93.24 points, or 0.81 per cent, to 11,670.75. The Standard & Poor’s 500 Index rose 14.23 points, or 1.13 per cent, to 1,271.87. The Nasdaq Composite Index climbed 38.65 points, or 1.46 per cent, to 2,691.52.
Analysts said that, historically, a strong first day bodes well for the market’s performance for the year.
Based on data since 1945, if the S&P 500 is up on the first trading day of the year, it ends the year higher 74 per cent of the time, with an average annual gain of 10.6 per cent, according to Birinyi Associates in Stamford, Connecticut.
If stocks end the month of January higher, then 73 per cent of the time the index rises for the year, based on data since 1929, Howard Silverblatt, an analyst at Standard & Poor’s, said.