Stocks Leap in Late-Day Rally on Data, Fed Speculation
FOX Business: The Power to Prosper
After a day spent fluctuating between positive and negative territory, the Dow raced into the green in a late-day run after upbeat durable goods data and speculation the Federal Reserve may unleash another round of economic stimulus boosted traders' confidence.
Today's Markets
The Dow Jones Industrial Average jumped 144 points, or 1.3%, to 11,321, the S&P 500 rose 15.3 points, or 1.3%, to 1,178 and the Nasdaq Composite gained 21.6 points, or 0.88%, to 2,468. The FOX 50 climbed 10.7 points to 853.
The markets have now posted gains for three-straight days. The blue chips have tacked on 503 points, or 4.7% in that time, while the broader S&P 500 is up 4.8%.
Financials like Bank of America (NYSE:BAC), which had been crushed in prior sessions, led the way higher on the day. Utilities such as Consolidated Edison (NYSE:ED) also posted a strong performance, while Dow-component McDonald's (NYSE:MCD) finished at an all-time high.
Gold, which has been on a meteoric run as a result of turmoil in the equity markets, has pulled back 7% over the last two days, and made the largest one-day percentage drop in three years. The precious metal plunged $104.20, or 5.6%, to $1,754 a troy ounce.
On the economic front, durable goods orders jumped 4% last month, topping forecasts of a gain of 2%. Excluding the transportation component, orders were up 0.7%, also beating expectations of a decline of 0.5%.
The report comes as "good news" for the economic picture, according to Chris Williamson, chief economists at Markit, a London-based financial data company. However, Williamson notes the optimism "needs to be treated with caution" as the underlying trend remains soft.
While the report is a lagging indicator, it figures into broader economic growth measures. In particular, companies like General Electric (NYSE:GE) and Caterpillar (NYSE:CAT) that make such items could be affected by these data.
The Congressional Budget Office said the budget deal lawmakers reached last month combined with low interest rates is forecast to cut budget deficits in half over the next decade. The CBO's estimated cumulative deficit for the next ten years is $3.5 trillion, down $3.3 trillion from the prior estimate.
However, the report was not entirely positive. The non-partisan Congressional office said the 2011 budget gap is expected to hit $1.3 trillion, or 8.5% of total economic output -- the third-widest in 65 years. Additionally, the CBO says economic expansion will be "well below the economy's potential" for several years. As a result of only modest growth, the employment is forecast to increase slowly, with the unemployment rate staying stuck above 8% until 2014.
Applications for home mortgages for purchases fell 5.7% to a nearly 15-year low as worries about the strength of the economy kept home-buyers out of the market, the Mortgage Bankers Association said. The broader index, which includes refinancing and mortgage activity, was off 2.4% for the month.
All Eyes on Jackson Hole
The economic data calendar is fairly light this week, but all eyes are on Jackson Hole, Wyoming, where Federal Reserve Chairman Ben Bernanke is set to speak on Friday. With the economy facing increased economic headwinds, market participants are speculating whether the central bank will unveil a new round of quantitative easing.
The Fed's prior easing program, dubbed QE2, was completed in June, and the Fed has repeatedly said it stands ready to leverage additional tools to stimulate the economy, should it be warranted.
Energy markets were mixed on the day.
Light, sweet crude fell 28 cents, or 0.33%, to $85.16 a barrel. Wholesale RBOB gasoline was up slightly to $2.88 a gallon.
In currencies, the euro fell 0.06% on the U.S. dollar, while the greenback gained 0.19% against a basket of world currencies.
Prices at the pump were slightly higher overnight, but have been trending lower. A gallon of regular costs $3.58 on average nationwide, down from $3.69 last month, but well higher than the $2.70 drivers paid last year.
Corporate News
United Therapeutics (NASDAQ:UTHR) said its oral lung drug failed to meet its main goal in a late-stage trial, sending shares nose diving more than 20%.
Foreign Markets
The English FTSE 100 gained 1.5% to 5,206, the French CAC 40 gained 1.8% to 3,140, and the German DAX soared 2.7% to 5,681.
In Asia, the Japanese Nikkei 225 slumped 1.1% to 8,639 and the Chinese Hang Seng tumbled 2.1% to 19,467.