NEW YORK - US stocks rallied today as economic data bolstered hopes that the Federal Reserve may soon be done raising interest rates, and the S&P 500 recorded its best weekly gain since November 2004.
A sharp drop in oil prices also helped sentiment, easing worries about energy costs. The
Dow's weekly rise was its best since May 2005, and all three major indexes ended the day more than 1 per cent higher.
Shares of rate-sensitive financial services companies Citigroup Inc., Wells Fargo & Co. and Bank of America Corp. were among the stocks giving the biggest lift to the Standard & Poor's 500 Index. Citigroup also led the Dow higher, along with American Express Co.
Government data on gross domestic product showed the economy slowed more than expected in the second quarter, lifting expectations that the Federal Reserve's two-year campaign of raising rates may be near an end.
"There are still signs of inflation out there, but the (GDP data) was weak enough to convince people that the Fed will have to pause," said Marc Pado, US market strategist at Cantor Fitzgerald & Co. in San Francisco. "That's what opened the door for the broad-based advance."
The Dow Jones industrial average climbed 119.27 points, or 1.07 per cent, to end at 11,219.70. The Standard & Poor's 500 Index gained 15.35 points, or 1.22 per cent, to finish at 1,278.55. The Nasdaq Composite Index advanced 39.67 points, or 1.93 per cent, to close at 2,094.14.
For the week, the Dow rose 3.23 per cent, the S&P 500 gained 3.08 per cent and the Nasdaq advanced 3.65 per cent. It was the best weekly percentage gain for the Nasdaq since early January.
The Fed's next meeting on interest-rate policy is August 8.
US crude oil futures fell in a sell-off on the New York Mercantile Exchange, triggered by talk among traders that there might soon be a cease-fire in the conflict between Israel and the Hizbollah guerrillas in Lebanon.
On the Nasdaq, shares of Intel Corp. rose 4.1 per cent, or 71 cents, to settle at US$18.18, a day after the No. 1 chip maker unveiled its new energy-saving computer chips.
The Philadelphia Stock Exchange index of semiconductor stocks jumped 3 per cent, its biggest percentage gain in about three weeks.
"Any good news from a major player like Intel usually translates into good news for the sector," said Ray Rund, head of research with Shaker Investments in Cleveland, adding that semiconductor stocks "are starting to look cheap."
The SOXX is down about 15 per cent for the year.
Also buoying the Nasdaq was news from KLA-Tencor Corp., the No. 2 US supplier of microchip production tools, which said late Thursday that quarterly revenue rose as chip makers worked to increase productivity. KLA-Tencor shares shot up 5.7 per cent, or US$2.28, to US$42.36.
Wall Street got some good news before today's opening bell when the US government reported that gross domestic product grew at an annual rate of 2.5 per cent in the second quarter -- well below the forecast for 3 per cent growth and down sharply from the first quarter's jump of 5.6 per cent. GDP is the output of all goods and services within US borders.
The sharp slowdown in GDP growth gave investors reason to believe the Fed may soon end its credit-tightening campaign to fight inflation. That tightening cycle, which has resulted in 17 consecutive interest-rate increases since June 2004, has stirred investors' worries that growth will slow, consumers will curb spending and corporate profits will be squeezed.
The news drove up the prices of US Treasury debt, causing the yield of the benchmark 10-year note to tumble to a one-month low at 4.996 per cent. The 10-year note's price, which moves in the opposite direction of its yield, climbed 11/32 to 101.
Shares of Citigroup rose 2.2 per cent, or US$1.02, to US$48.33, while Wells Fargo shares gained 3.3 per cent, or US$2.34, to US$72.41 and Bank of America shares advanced 1.3 per cent, or 64 cents, to US$51.66.
American Express, a Dow component, was up 1.8 per cent, or 90 cents, at US$52.19, while another blue-chip bank, JPMorgan Chase & Co., was up 1.7 per cent, or 78 cents, at US$45.48.
The Philadelphia KBW index of bank stocks rose 2 per cent.
US crude oil for September delivery fell US$1.30 to settle at US$73.24 a barrel on the New York Mercantile Exchange.
Lower oil prices typically help the stock market because they reduce energy costs for consumers and corporations.
An exception to that scenario, of course, is when a decline in oil prices helps motivate investors to sell some energy companies' stocks. The top drag on the S&P 500 was No. 2 US oil company Chevron Corp., whose quarterly profit missed analysts' estimates. Chevron shares fell 2.5 per cent, or US$1.68, to US$66.05.
Trading was active on the NYSE, with about 1.69 billion shares changing hands, above last year's daily average of 1.61 billion, while on Nasdaq, about 1.88 billion shares traded, above last year's daily average of 1.80 billion.
Advancing stocks outnumbered declining ones by a ratio of about 9 to 2 on the NYSE and by 7 to 3 on Nasdaq.
(Additional reporting by Chris Sanders)
- REUTERS
<i>US stocks:</i> Shares jump on hopes for end in rate hikes
NEW YORK - US stocks rallied today as economic data bolstered hopes that the Federal Reserve may soon be done raising interest rates, and the S&P 500 recorded its best weekly gain since November 2004.
A sharp drop in oil prices also helped sentiment, easing worries about energy costs. The
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