FOX Business: The Power to Prosper
Wall Street climbed to another two-year high on Wednesday as buyers stepped in amid enthusiasm for easing fears about Europe’s debt mess and high hopes for big banks like JPMorgan.
The Dow Jones Industrial Average rose 83.56 points, or 0.72%, to 11755.44, the Standard & Poor's 500 gained 11.48 points, or 0.90%, to 1285.96 and the Nasdaq Composite jumped 20.50, or 0.75%, to 2737.33. The FOX 50 added 7.95 points, or 0.87%, to 919.86.
Global markets kicked off the bullishness early in the day as traders breathed a sigh of relief after Portugal successfully auctioned off nearly $2 billion of bonds and the buying gathered momentum in the wake of a favorable analyst note upgrading the U.S. banking sector. Thanks to the rally, the Dow landed at levels unseen since August 2008.
“Money is being redeployed into equities and out of bonds due to growing confidence that we have the ability to crawl our way out of recession,” said Peter Kenny, managing director at Knight Capital Group. “You have what sounds like a recovery -- dare I say that. That’s what the market is pricing in.”
Despite the snowstorm hitting the northeast, the New York Stock Exchange opened on time without any problems. However, the inclement weather did appear to weigh a bit on trading volumes.
Underscoring the enthusiasm for bank stocks, the Dow was led higher by financial giants JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC). The weakest blue-chip stocks were Alcoa (NYSE:AA) and Walt Disney (NYSE:DIS).
The Nasdaq Composite, which has outperformed the broader markets, saw more modest gains. The index was kept afloat by rallies from tech stocks like Nvidia (NASDAQ:NVDA) and Symantec (NASDAQ:SYMC).
The triple-digit rally comes after soaring crude oil nudged Wall Street modestly higher on Tuesday, ending the Dow's three-day slump.
“We get the feeling nobody is out there really buying it steadily,” Robert Heller, a NYSE trader at MEB Options, told FOX Business. “However, it seems to want to keep going. If we get over another psychological level like 12000 [on the Dow], we could see money pouring in and then who knows what will happen.”
Wednesday's optimism was fueled initially by debt-ridden Portugal, which despite being at the epicenter of the debt crisis, managed to sell the maximum allotted $1.62 billion of debt in a highly-anticipated bond auction. The successful sale comes amid continued reports of pressure from fellow European Union members on Portuguese officials to accept what analysts see as an inevitable bailout.
Buoyed by the debt sale, the cost to insure the debt of European financial companies eased and the euro recaptured the $1.31 level, surging 1.25% to $1.3129. European banks such as Barclays (NYSE:BCS) and HSBC (NYSE:HBC) also rallied around the easing tensions there. The attention will now shift to key auctions of Spanish and Italian debt later this week.
In the U.S., the Treasury Department had no problem on Wednesday auctioning off $21 billion of 10-year notes at a solid bid-to-cover ratio.
The rally also received a jolt from the financial sector, which leaped 1.7% thanks to an upgrade of the U.S. banking sector to “overweight” by Wells Fargo. The brokerage cited tumbling credit costs and positive loan growth and projected the industry’s earnings will soar 59% and dividend payout ratios will double to 25% to 30%.
Wells Fargo tapped BofA, PNC (NYSE:PNC), Comerica (NYSE:CMA), Goldman Sachs (NYSE:GS) and JPMorgan as its top ideas for 2011.
In the commodities complex, crude oil built on its best day since December 1. Crude gained 75 cents a barrel, or 0.82%, to $91.86 -- its highest settle since October 2008. Gold advanced $1.70 a troy ounce, or 0.12%, to $1,385.70.
On the economic front, U.S. markets barely moved after the government said import prices rose 1.1% in December, easing back from November's 1.5% jump but still marking the largest three-month gain in more than a year. Export prices ticked up 0.7%.
Wall Street also had little reaction to the Federal Reserve's Beige Book, which showed that while housing still remained depressed at the end of the year, labor markets appeared to be "firming." The anecdotal economic snapshot from the central bank's regional branches indicated "economic activity continued to expand moderately."
American International Group (NYSE:AIG) inked a $2.16 billion all-cash deal to sell its Taiwan Nan Shan Life business to a group led by conglomerate Ruentex, potentially ending a 15-month process to unload the unit. The bailed-out insurance giant plans to use the proceeds to pay down its debt to U.S. taxpayers. A $2.15 billion bid last year to sell the business was blocked by a regulator.
ITT (NYSE:ITT) soared 16% to two-year highs after unveiling plans to break itself into three publicly traded companies that focus on water, defense and engineering. Under the plan, ITT shareholders would own shares in all three corporations. ITT said it expects to finalize and execute the split before the end of the year.
Zale (NYSE:ZLC) surged 43% to 15-month highs after revealing an 8.5% leap in holiday season sales, bouncing back from a 12% dive a year ago. Holiday sales account for nearly a third of Zale’s annual sales.
Advanced Micro Devices’ (NYSE:AMD) board of directors fretted about Dirk Meyer’s strategy for getting AMD’s chips into new gadgets like tablets before kicking the CEO out of the C-Suite this week, The Wall Street Journal reported. The board replaced the well-respected Meyer with Thomas Seifert, its chief financial officer, until it can find a permanent replacement. The move helped fuel a 9% plunge in AMD’s stock on Tuesday.
The U.K.'s FTSE 100 gained 0.61% to 6050.72, Germany's DAX rallied 1.83% to 7068.78 and France's CAC 40 jumped 2.15% to 3945.07.
In Asia, Japan's Nikkei 225 inched up 0.02% to 10512.80, Hong Kong's Hang Seng advanced 1.54% to 24125.60 and China's Shanghai Composite advanced 0.62% to 2821.30.