Red Hot Banks Nudge Markets to New 2-Year Highs


FOX Business: The Power to Prosper

Powered by streaking financial stocks, Wall Street quietly landed on Wednesday at levels unseen in more than two years and the S&P 500 notched its fifth rally in a row.

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Today’s Markets

The Dow Jones Industrial Average rose 26.33 points, or 0.23%, to 11559.49, the Standard & Poor's 500 gained 4.24 points, or 0.34%, to 1258.84 and the Nasdaq Composite jumped 3.87 points, or 0.15%, to 2671.48. The FOX 50 picked up 2.40 points, or 0.27%, to 898.79.

The latest mini rally on Wall Street occurred in the face of disappointing reports on third quarter gross domestic product, November existing home sales and Nike’s (NYSE:NKE) earnings. None of those events triggered much selling, keeping Wall Street's bullish trend in tact.

“The absence of sellers and tremendous resiliency of the market have been the story of the last two weeks now,” said Michael James, managing director of equity trading at Wedbush Securities. “Nothing can make the market overall go down.”

Yet it would be hard to put too much credence into Wednesday’s gains as volume was exceedingly low amid the holiday-shortened trading week. The markets also traded in a very tight range, with the Dow moving just 38 points between its high and low.

Most of the Dow's 30 stocks ended in positive territory, led by financial giants Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM). The index's weakest links were American Express (NYSE:AXP) and Intel (NASDAQ:INTC).

Financial stocks stayed hot, extending their Tuesday gains by jumping another 1%. The rally continues to be driven by speculation the industry will see more M&A action, especially in the wake of Hancock Holding's (NASDAQ:HBHC) $1.5 billion all-stock deal to acquire fellow Gulf Coast bank Whitney Holding (NASDAQ:WTNY) at a healthy 42% premium.

With that in mind, the financial sector was driven higher by regional banks like SunTrust (NYSE:STI) and Zions Bancorp (NASDAQ:ZION).

“There’s clearly some significant buying in the financials across the board and that has been the main strength behind the market,” said James.

After two days without any major economic headlines, Wall Street traders had a pair of key reports to analyze on Wednesday.

The Commerce Department revised third-quarter GDP growth to just 2.6%, up from 2.5%. Economists had expected a bigger upward revision to 2.8%. The government also cut consumer-spending growth from 2.8% to 2.4%.

However, the report is very backward-looking as Wall Street has largely set its sights on the fourth and first quarters. Economists have recently raised their estimates for 2011 economic growth, thanks in part to the deal that extended the Bush tax cuts for two years.

Likewise, Wall Street mostly shrugged off a new report from the National Association of Realtors showing existing home sales rose by 5.6% in November to an annual rate of 4.68 million units. The markets had been expecting a 5% increase to a rate of 4.72 million units. However, home builders like Pulte (NYSE:PHM) and Toll Brothers (NYSE:TOL) closed sharply higher.

In the commodities complex, crude oil rose 66 cents a barrel, or 0.73%, to $90.48 -- its highest level since October 2008. Gold declined $1.40 a troy ounce, or 0.10%, to $1,386.80.

U.S. markets are scheduled to be closed on Friday in observance of Christmas.

Corporate Movers

Walgreen (NYSE:WAG) jumped 5% to 52-week highs after the drug store chain beat the Street with a third-quarter profit of 62 cents a share, compared with estimates of 54 cents. Walgreen said its same-store sales grew 0.8% and prescription sales rose 5.3%.

Nike (NYSE:NKE) slumped 5% a day after revealing future orders, excluding currency exchange rates, were up a disappointing 11%. The key metric overshadowed a stronger-than-expected fiscal second-quarter profit of 94 cents and a 10% rise in sales to $4.84 billion.

American International Group (NYSE:AIG) is reportedly nearing a decision on a preferred bidder for Nan Shan Life Insurance, the Taiwan business it is attempting to raise $2 billion by selling. According to The Wall Street Journal, AIG’s directors are expected to confer Thursday and a choice will likely be announced next week. The insurer has been narrowing its list based on who is most likely to win approval from a local regulator, the paper reported.

Orbitz (NYSE:OWW) slumped nearly 6% after the online travel site was dumped by AMR Corp.’s (NYSE:AMR) American Airlines. American stopped selling and displaying its ads on Orbitz after a judge turned down Orbitz’s request for an injunction on such a move.

Sony (NYSE:SNE) launched a new cloud computing-powered digital music service called Music Unlimited that gives users access at any time to about six million songs from major record labels. The service is debuting initially in the U.K. and Ireland and is set to expand to the U.S., Australia, Canada, France, Germany, Italy, Spain and New Zealand in 2011.

Global Markets

The U.K.'s FTSE 100 rose 0.53% to 5983.49, France's CAC 40 slipped 0.20% to 3919.71 and Germany's DAX sank 0.14% to 7067.92.

In Asia, Tokyo's Nikkei 225 fell 0.23% to 10346.50, Hong Kong's Hang Seng advanced 0.22% to 23045.20 and China's Shanghai Composite lost 0.90% to 2877.90.

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