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Market advances as financial stocks rebound
Source: Agencies |
January 14, 2010, Thursday
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THE stock market closed higher, following the lead of financial stocks as the heads of several big banks testified before Congress about the financial crisis.
Stocks fluctuated early yesterday but strengthened as the questioning of bank officials proceeded with little in the way of confrontation.
Industries seen as safer in a weak economy, like health care and utilities, posted some of the biggest gains.
The Dow Jones industrial average closed up 54 points after trading above 10,700 for the first time in 15 months. Broader indicators also advanced. Treasury prices fell, pushing interest rates higher, after jumping on Tuesday.
Executives including Goldman Sachs Group Inc. Chairman and CEO Lloyd Blankfein, JPMorgan Chase & Co. CEO James Dimon, Morgan Stanley Chairman John Mack and Bank of American Corp. CEO Brian Moynihan appeared before the Financial Crisis Inquiry Commission. It is the first meeting of the bipartisan, 10-member panel, which is investigating the near collapse of the financial system in the fall of 2008.
While the executives agreed that banks' actions contributed to the crisis that paralyzed the credit markets and worsened the recession, investors did not hear anything from the hearings that would encourage them to flee financial stocks.
The questions about banks underscored how many concerns investors are juggling. After a strong first week of the year in stocks, a disappointing profit report from Alcoa Inc. late Monday is causing concern that the robust earnings investors had been expecting for the final quarter of 2009 might not materialize.
On Wall Street, the Dow rose 53.51, or 0.5 percent, to 10,680.77. The index traded above 10,700 for the first time since Oct. 3, 2008, rising as high as 10,709.26.
The broader Standard & Poor's 500 index rose 9.46, or 0.8 percent, to 1,145.68, and the Nasdaq composite index rose 25.59, or 1.1 percent, to 2,307.90.
In much of 2009, companies boosted earnings by laying off workers and slashing expenses. But the benefits of cost-cutting can only go so far, and investors are looking for signs that increases in revenue will lift earnings. Intel Corp. is expected to post results Thursday, and JPMorgan Chase & Co. reports Friday.
Stocks pulled higher in afternoon trading after the Federal Reserve said the economy is rebounding in more parts of the country. It added that economic activity remains at a "low level." The report, which provides readings on the U.S. economy by region and precedes the next meeting of the Fed's interest rate policymakers by two weeks, boosted hopes for a rebound.
Stephen Wood, chief market strategist at Russell Investments, expects improvements in economic and corporate news in 2010 will be incremental and that big gains seen in the market in the past 10 months will taper off.
"This might be like running on the beach with your shoes on. It's going to be a real slog," Wood said.
Bond prices fell after jumping Tuesday, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.80 percent from 3.72 percent late Tuesday.
Crude oil fell US$1.14 to settle at US$79.65 per barrel on the New York Mercantile Exchange. The drop in oil hurt stocks of energy companies.
The dollar fell against most other major currencies, while gold rose.
Meanwhile, investors sold shares of Google Inc. after the Internet search company threatened to withdraw from China after computer hackers had led human-rights activists to reveal their e-mail accounts to outsiders. Google fell US$3.39, or 0.6 percent, to US$587.09. Shares of China's largest search engine, Baidu, rose US$52.99, or 13.7 percent, to US$439.48.
Among banks, Goldman Sachs rose US$1.25, or 0.7 percent, to US$169.07, while JPMorgan rose 76 cents, or 1.8 percent, to US$44.25. Morgan Stanley advanced 13 cents, or 0.4 percent, to US$31.26 and Bank of America rose 26 cents, or 1.6 percent, to US$16.62.
There is growing public discord over big profits and bonuses at financial companies that has the White House considering a levy on banks to cover about US$120 billion in taxpayer losses from the government's industry bailout. Opponents say it could jeopardize a recovery by the nation's biggest banks.
Scott Colyer, chief executive at Advisors Asset Management in Monument, Colo., is concerned that imposing a tax on banks would threaten his expectation for a strong economic rebound in 2010.
"You don't want to take money from a group that you're trying to prop up," he said.
Investors also looked to reports due Thursday and Friday on retail sales and industrial production. Far more companies will report earnings next week, which will give investors more signals about the state of the economy's recovery.
In other trading, Chevron Corp. fell 61 cents, or 0.8 percent, to US$79.80 as oil dropped.
Three stocks rose for every one that fell on the New York Stock Exchange, where volume came to a light 969.7 million shares, compared with 1.1 billion shares Tuesday.
The Russell 2000 index of smaller companies rose 8.06, or 1.3 percent, to 643.56.
Stocks fluctuated early yesterday but strengthened as the questioning of bank officials proceeded with little in the way of confrontation.
Industries seen as safer in a weak economy, like health care and utilities, posted some of the biggest gains.
The Dow Jones industrial average closed up 54 points after trading above 10,700 for the first time in 15 months. Broader indicators also advanced. Treasury prices fell, pushing interest rates higher, after jumping on Tuesday.
Executives including Goldman Sachs Group Inc. Chairman and CEO Lloyd Blankfein, JPMorgan Chase & Co. CEO James Dimon, Morgan Stanley Chairman John Mack and Bank of American Corp. CEO Brian Moynihan appeared before the Financial Crisis Inquiry Commission. It is the first meeting of the bipartisan, 10-member panel, which is investigating the near collapse of the financial system in the fall of 2008.
While the executives agreed that banks' actions contributed to the crisis that paralyzed the credit markets and worsened the recession, investors did not hear anything from the hearings that would encourage them to flee financial stocks.
The questions about banks underscored how many concerns investors are juggling. After a strong first week of the year in stocks, a disappointing profit report from Alcoa Inc. late Monday is causing concern that the robust earnings investors had been expecting for the final quarter of 2009 might not materialize.
On Wall Street, the Dow rose 53.51, or 0.5 percent, to 10,680.77. The index traded above 10,700 for the first time since Oct. 3, 2008, rising as high as 10,709.26.
The broader Standard & Poor's 500 index rose 9.46, or 0.8 percent, to 1,145.68, and the Nasdaq composite index rose 25.59, or 1.1 percent, to 2,307.90.
In much of 2009, companies boosted earnings by laying off workers and slashing expenses. But the benefits of cost-cutting can only go so far, and investors are looking for signs that increases in revenue will lift earnings. Intel Corp. is expected to post results Thursday, and JPMorgan Chase & Co. reports Friday.
Stocks pulled higher in afternoon trading after the Federal Reserve said the economy is rebounding in more parts of the country. It added that economic activity remains at a "low level." The report, which provides readings on the U.S. economy by region and precedes the next meeting of the Fed's interest rate policymakers by two weeks, boosted hopes for a rebound.
Stephen Wood, chief market strategist at Russell Investments, expects improvements in economic and corporate news in 2010 will be incremental and that big gains seen in the market in the past 10 months will taper off.
"This might be like running on the beach with your shoes on. It's going to be a real slog," Wood said.
Bond prices fell after jumping Tuesday, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.80 percent from 3.72 percent late Tuesday.
Crude oil fell US$1.14 to settle at US$79.65 per barrel on the New York Mercantile Exchange. The drop in oil hurt stocks of energy companies.
The dollar fell against most other major currencies, while gold rose.
Meanwhile, investors sold shares of Google Inc. after the Internet search company threatened to withdraw from China after computer hackers had led human-rights activists to reveal their e-mail accounts to outsiders. Google fell US$3.39, or 0.6 percent, to US$587.09. Shares of China's largest search engine, Baidu, rose US$52.99, or 13.7 percent, to US$439.48.
Among banks, Goldman Sachs rose US$1.25, or 0.7 percent, to US$169.07, while JPMorgan rose 76 cents, or 1.8 percent, to US$44.25. Morgan Stanley advanced 13 cents, or 0.4 percent, to US$31.26 and Bank of America rose 26 cents, or 1.6 percent, to US$16.62.
There is growing public discord over big profits and bonuses at financial companies that has the White House considering a levy on banks to cover about US$120 billion in taxpayer losses from the government's industry bailout. Opponents say it could jeopardize a recovery by the nation's biggest banks.
Scott Colyer, chief executive at Advisors Asset Management in Monument, Colo., is concerned that imposing a tax on banks would threaten his expectation for a strong economic rebound in 2010.
"You don't want to take money from a group that you're trying to prop up," he said.
Investors also looked to reports due Thursday and Friday on retail sales and industrial production. Far more companies will report earnings next week, which will give investors more signals about the state of the economy's recovery.
In other trading, Chevron Corp. fell 61 cents, or 0.8 percent, to US$79.80 as oil dropped.
Three stocks rose for every one that fell on the New York Stock Exchange, where volume came to a light 969.7 million shares, compared with 1.1 billion shares Tuesday.
The Russell 2000 index of smaller companies rose 8.06, or 1.3 percent, to 643.56.
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