The big 2009 stock market rally hit a new milestone today when the Standard & Poor's 500 Index ($INX) surged more than 3% and finished recovering all of the 25% loss it saw between the start of the year and early March.
The index, widely watched by investors because it represents roughly 75% of the capitalization of the U.S. stock market, closed up 30 points, or 3.4%, to 907, its best close since Jan. 8.
The S&P 500 is now up 0.4% for the year.
The strong finish was part of a broad rally that saw the Dow Jones Industrial Average ($INDU) jump 214 points, or 2.6%, to 8,427, its best close since Jan. 13. The Nasdaq Composite Index ($COMPX) added 44 points, or 2.6%, to 1,764, its highest close since Nov. 4.
The rally was set off by a better-than-expected report on pending home sales -- a suggestion that the U.S. housing market has hit bottom -- and a surprising gain in construction spending.
With the S&P 500 moving into positive territory, the Dow is the only one of the three major indexes still showing a loss in 2009. The blue-chip index is off 350 points, or about 4%.
The Nasdaq, which has shown a gain for the year for the last four weeks, is up 11.8%.
Since the March 9 market bottom, the S&P 500 has risen 34.1%; the Nasdaq is up 39%. The Dow is up 28.7%.
Today's was just the S&P 500's sixth close above its 2008 close of 903.25. The index began the year with five finishes in positive territory; then the market fell apart until bottoming in March.
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Futures trading suggests that markets will open higher on Tuesday. The market's big finish comes in a week expected to be filled with drama, including earnings reports from Walt Disney (DIS, news, msgs) after Tuesday's close and Cisco Systems (CSCO, news, msgs) after Wednesday's close.
The big news will come after Thursday's close, when the government issues its report on the financial health of 19 of the biggest banks, and Friday, with the Labor Department's unemployment and payroll employment report.
| Index | Today | Ytd. chg. | Chg. since 3/9 | Loss through 3/9 |
|---|---|---|---|---|
| Dow Jones Industrial Average | 8,426.74 | -3.98% | 28.71% | -25.40% |
| Standard & Poor's 500 Index | 907.24 | 0.44% | 34.10% | -25.10% |
| Nasdaq Composite Index | 1,763.56 | 11.83% | 39.01% | -19.56% |
| Nasdaq-100 Index | 1,427.96 | 17.85% | 36.79% | -13.85% |
| Russell 2000 Index | 506.82 | 1.48% | 47.65% | -31.27% |
Banks power the rally
Bank stocks led today's rally in anticipation that Thursday's release of government stress test results won't cause havoc among banking companies.
Bank of America (BAC, news, msgs) was up 19.3% to $10.28. Wells Fargo (WFC, news, msgs) jumped 23.7% to $24.25. The closing prices for both stocks were their best since Jan. 13.
Stock Charts (Year)
Wells Fargo
Bank of America
In addition, a Bloomberg report that American International Group's (AIG, news, msgs) first-quarter earnings won't require additional government support also improved moods. AIG rose 5.8% to $1.46 and an additional 6.2% to $1.55 after hours.
Crude oil rose $1.27 a barrel, or 2.4%, to $54.47 in New York and pushed energy stocks generally higher.
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In addition to the real estate news, materials and construction stocks were rising on news that industrial production in China rebounded in March for the first time in nine months.
The report sent aluminum, copper and steel prices higher. Alcoa (AA, news, msgs) was up 6.9% to $10.36. U.S. Steel (X, news, msgs) was up 10.2% to $31.46. Freeport-McMoRan Copper & Gold (FCX, news, msgs) jumped 9.4% to $48.64.
Remarkably, the rally had little effect on interest rates; a stock rally often pulls money from bonds and pushes rates higher. The 10-year Treasury note was yielding 3.16%, down from 3.17% on Friday.
Twenty-seven of the 30 Dow stocks were higher today, along with 447 S&P stocks and 84 Nasdaq-100 stocks.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $54.47 | $53.20 | $1.27 | 6.55% | 22.13% |
| Heating oil (per gallon) | $1.4345 | $1.3884 | $0.0461 | 9.11% | 2.05% |
| Natural gas (per million BTU) | $3.7250 | $3.5460 | $0.1790 | 10.44% | -33.74% |
| Unleaded gasoline (per gallon) | $1.5860 | $1.5174 | $0.0686 | 7.58% | 57.31% |
Good news for housing
Pending home sales rose 3.2% to a level of 83.7 in March from February, the National Association of Realtors reported . The month to month gain was better than the 0.4%-to-0.6% increase economists had expected. More importantly, the year-over-year gain was 1.1% in March.
Meanwhile, the government said that construction spending rose 0.3% in March, after a 0.9% decrease in February. Economists were looking for a 1% to 1.5% drop in March.
The pending home sales index report looks at signed contracts for sales that will be closed in six weeks.
Stock Charts (Year)
Lennar
Pulte Homes
The home sales report supports comments from Warren Buffett this weekend that there are some signs of stabilization in the housing market. "In the last few months you've seen a real pickup in activity although at much lower prices," Buffett said.
Existing-home sales have slumped about 30% from their high in 2006.
Homebuilding stocks rose on the news. Lennar (LEN, news, msgs) rose 9.3%to $10.34; Pulte Homes (PHM, news, msgs) was up 9.2% to $12.16. The Philadelphia Housing Sector Index ($HGX.X) was up 7.5% to 97.60.
Meanwhile, investors are waiting for Friday's April jobs report from the Labor Department.
Economists expect the jobless rate to rise to 8.9% in April, up from 8.5% in March. They predict a loss of 600,000 jobs last month, which would bring the total number of jobs lost since the recession officially began in December 2007 to 5.7 million -- the most of any economic slump since World War II.
Intel, Research In Motion get upgrades
Techs received a boost from Research In Motion (RIMM, news, msgs) and Intel (INTC, news, msgs), both of which received positive comments from analysts this morning.
Goldman Sachs added Research In Motion to its "Americas Conviction" buy list. "We expect the stock to outperform due to upward estimate revisions and the multiple to expand as a result of robust smartphone demand, further market share gains, and a bottoming in the handset market," analyst Simona Jankowski said in a research note.
Stock Charts (Year)
Intel
Research In Motion
"We see this very large and untapped consumer market," Balsillie said during a presentation to analysts and investors. More than half of Research In Motion's 25 million subscribers now fall into the non-corporate category.
Intel was upgraded to "overweight" from "equal weight" at Morgan Stanley, which said orders are set to grow and analysts' earnings estimates are too low.
Research In Motion shares rose 2.8% to $74.30; Intel shares were up 5.4% to $16.66. The Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks, including Intel and Research In Motion, was up 2.2% to 1,428. Since March 9, the index has jumped 36.8%.
Buffett criticizes 'stress tests'
Investors and bank executives are most likely fretting this week about the results of the Treasury Department's "stress tests" on the 19 biggest U.S. banks, but Buffett isn't worried.
"I think I know their future, frankly, better than somebody that comes in to take a look," Buffett said Sunday at a press conference after Berkshire Hathaway's (BRK.A, news, msgs) annual meeting in Omaha, Neb.
Buffett dismissed the government's method of "a checklist-type approach," saying that he judges banks' health and strength based on their "dynamism" and ability to attract deposits.
The Associated Press reported that regulators told Wells Fargo that it needs to shore up its finances. But the Oracle of Omaha told CNBC this weekend that he applied his own stress test to Wells Fargo, in which Buffett's Berkshire Hathaway has a stake, and that it "passed with flying colors."
He also praised U.S. Bancorp (USB, news, msgs) and M&T Bank (MTB, news, msgs), saying that none of the three banks needs more capital. U.S. Bancorp rose13.2% to $20.33; M&T Bank was up 14% to $56.29.
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The comments from Berkshire's chiefs come as a weekend report in The Wall Street Journal said Citigroup (C, news, msgs) could need to raise up to an additional $10 billion in new capital. The Financial Times this morning said Citigroup and Bank of America (BAC, news, msgs) are both working on plans to raise $10 billion in new capital. Bank of America has denied the report.
Buffett acknowledged that he would not be surprised if Citigroup needing more capital, but he told CNBC that "nothing bad is going to happen to people who have their money with Citi. Nothing is going to happen bad with any of the big banks. Or the small banks," Buffett said. "How much capital the people who supervise them want them to have is up to the supervisors."
But Citigroup's massive losses have painted a dismal picture for the overall banking sector, Buffett said at Sunday's press conference. The Oracle of Omaha also said that only four of the banks the government is testing are "too big to fail."
The stress test results were supposed to have been released today, but bank executives have been negotiating with the Treasury Department about its preliminary findings, prompting Treasury to delay the results until Thursday.
Citigroup was up 7.7% to $3.20 this afternoon.
Separately, Standard & Poor's put 23 banks on credit watch with negative implications. The list includes BBT Corp. (BBT, news, msgs), Regions Financial (RF, news, msgs), U.S. Bancorp, KeyCorp (KEY, news, msgs) and PNC Financial (PNC, news, msgs).
The move had little effect on the companies' share prices.
Record attendance at Berkshire meeting
Buffett had a pretty busy weekend: A record 35,000 people came to Omaha for Berkshire's annual meeting, 4,000 more than last year's record.Stock Charts (Year)
Berkshire Hathaway
Buffett offered a gloomy outlook for the newspaper business.
"For most newspapers in the United states, we would not buy them at any price," Buffett said. "They have the possibility of going to just unending losses."
Obama pushes new international tax code
President Barack Obama this morning outlined proposals to make it harder for U.S. multinational companies to use overseas tax havens.
The president's plan includes reforms that ensure the tax code does not handicap companies seeking to create jobs in the U.S., as well as reforms that reduce the amount of tax revenue lost to tax havens. The overhaul is part of the government's plan to raise an additional $210 billion in tax revenue over the next 10 years.
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Sprint Nextel's loss widens; Street sees progress
Sprint Nextel (S, news, msgs) reported a loss of $594 million, or 21 cents a share today, more than the $505 million, or 18 cents a share it loss a year ago.Stock Chart (Year)
Sprint
But, excluding one-time items, the telecom company said it would have earned 3 cents per share; analysts were looking for a loss of 4 cents per share.
Shares jumped 7.1% to $5.
Net operating revenue fell 12% to $8.21 billion.
Sprint is currently negotiating with Sweden's LM Ericsson (ERIC, news, msgs) to outsource management of its cellular network, a move that would mean 20% cost savings on total operating expenses, The Wall Street Journal reported today.
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Fiat eyes GM's Opel
Just after signing a deal with Chrysler on Thursday, Italy's Fiat (FIATY, news, msgs) announced today that it is in negotiations to take over General Motors' (GM, news, msgs) European division, Opel.
In an interview with the Financial Times, Fiat CEO Sergio Marchionne said that a tie-up among Fiat, Chrysler and Opel would be a merger made in heaven. Marchionne seeks to build a global auto powerhouse with sales of about $100 billion per year, but he faces challenges. Chrysler is suffering through a Chapter 11 filing, and Opel's fate is in the hands of the German government, which must agree to provide aid if Fiat is to acquire the company.
Marchionne wants Fiat to separate Fiat Auto from its other divisions, join them with Opel and Fiat's prospective stake in Chrysler to create a company with sales of 6 million to 7 million vehicles a year. It would be second only to Toyota (TM, news, msgs) in global sales.
But Fiat will need aid from the German government, and loan guarantees from the U.K. and several other countries where Opel has plants, to complete the deal.
Andrew Rosenbaum contributed to this report.
| Mon. | Fri. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.175% | 0.145% | 0.030 | 40.00% | 52.17% |
| 5-year Treasury note yield | 2.031% | 2.031% | 0.000 | 0.69% | 30.95% |
| 10-year Treasury note yield | 3.157% | 3.174% | -0.017 | 1.06% | 40.69% |
| 30-year Treasury bond yield | 4.065% | 4.088% | -0.023 | 0.52% | 51.06% |
| Currencies | |||||
| U.S. Dollar Index | 84.115 | 84.705 | -0.590 | -0.78% | 2.39% |
| British pound in dollars | $1.4990 | $1.4928 | 0.0063 | 1.36% | 1.74% |
| Dollar in British pounds | £0.6671 | £0.6699 | -0.0028 | -1.35% | -1.71% |
| Euro in dollars | $1.3382 | $1.3286 | 0.0096 | 1.14% | -4.48% |
| Dollar in euros | € 0.7473 | € 0.7527 | -0.0054 | -1.12% | 4.69% |
| Dollar in yen | 98.94 | 99.26 | -0.32 | 0.42% | 9.15% |
| Canadian dollar in U.S. dollars | $0.850 | $0.843 | $0.0071 | 1.43% | 3.89% |
| U.S. dollar in Canadian dollars | $1.178 | $1.187 | -$0.0091 | -1.34% | -3.75% |
| Commodities | |||||
| Gold | $902.20 | $888.20 | $14.00 | 1.23% | 2.02% |
| Copper | $2.1440 | $2.1010 | $0.04 | 4.71% | 52.06% |
| Silver | $13.1130 | $12.5000 | $0.61 | 6.39% | 10.67% |
| Corn | $3.9800 | $4.0625 | -$0.08 | 0.44% | -2.21% |
| Crude oil (NYMEX) (per barrel) | $54.47 | $53.20 | $1.27 | 6.55% | 22.13% |
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