Stocks move higher after 2 days of losses
Major stock indexes rose more than 2% on Wednesday to their highest levels in more than 11 weeks on further indications that the economy is stabilizing, signals echoed in a statement from the Federal Reserve.
Early in the day the government reported that the economy shrank at an annual rate of 6.1% in the first quarter, much steeper than the 5% rate forecast on average by economists. But investors were encouraged by a rebound in consumer spending and a drop in business inventories.
Later in the day, Fed policymakers said at the end of a two-day meeting that although the economy was still contracting, the pace of decline “appears to be somewhat slower” than the last time they met in mid-March.
“You had the Federal Reserve endorsing the basic stance that the economy is beginning to stabilize,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.
The Dow Jones industrial average jumped 168.78 points, or 2.1%, to 8,185.73, its highest close since Feb. 9. The blue-chip gauge is now 25% above March 9 low, even though stocks have been unsteady in the last several days on fears of a swine flu pandemic and persistent concerns about the country’s biggest banks.
The Standard & Poor’s 500 index gained 18.48 points, or 2.2%, to 873.64, its highest close since Jan. 28. The Nasdaq composite index advanced 38.13 points, or 2.3%, to 1,711.94. The tech-heavy index posted its highest finish since Nov. 4 and is up 8.6% for the year.
The Russell 2,000 index of smaller companies shot up 3.9%.
About five stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 6 billion shares compared with 5.3 billion shares traded Tuesday.
Better-than-expected first-quarter earnings continued to boost market as well. Time Warner shares jumped 14% after the company’s earnings, hit by deteriorating ad sales, fell less than Wall Street anticipated. General Dynamics climbed 5.4% after reporting a 3% increase in profit, bolstered by healthy sales of warships and other military equipment.
It was the financial sector, however, that led the market’s advance, as it has for the last month. Citigroup surged 8%, while JPMorgan Chase gained 5.2%. An index of 24 bank stocks climbed 5%.
Bank of America rose 6.5% amid reports, confirmed after the market closed, that shareholders voted to oust Ken Lewis as chairman. The company said Lewis would remain chief executive and keep his board seat.
But E-Trade Financial plunged 83 cents, or 34%, to $1.63 after the online brokerage posted a big loss and said regulators wanted it to raise more capital.
In other market highlights:
* DreamWorks Animation SKG soared $4.80, or 25%, to $23.87. The Glendale-based company reported higher profit on strong DVD sales, bucking an industrywide decline, and CEO Jeffrey Katzenberg’s contract was renewed through 2014.
* Aetna tumbled 10% after the health insurer said its subscribers used more medical services per person, driving the company’s costs up more than expected.
* Dendreon shares nearly doubled, recovering from a mystery plunge Tuesday, as investors applauded trial results from a prostate cancer treatment.
* Ameristar Casinos gained 20%. The Las Vegas-based casino operator reinstated its quarterly dividend because of an improved credit situation and posted earnings that topped expectations.
* The dollar fell against most other major currencies. Gold futures rose $7 to $899.80 an ounce in New York trading. Oil futures climbed $1.05 to settle at $50.97 a barrel.
* Overseas, key stock indexes rose 2.3% in Britain, 2.1% in Germany and 2.2% in France. Japanese shares fell 2.7%.
