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Wall Street gains 1% as IMF gives Europe hope

Last Updated: Thursday, January 19, 2012 - 09:21

New York: Stocks jumped to their highest since July on Wednesday as the International Monetary Fund sought to help countries hit by the European debt crisis, while forecast-beating earnings from Goldman Sachs dispelled some worries over bank profits.

The stronger-than-expected earnings from Goldman Sachs Group Inc (GS.N) followed disappointing results from Citigroup (C.N) on Tuesday and JPMorgan Chase & Co (JPM.N) last week.

Goldman shares shot up 6.8 percent to USD 104.31, while the S&P financial sector .GSPF rose 1.7 percent, leading the S&P 500 higher.

The banking sector has outperformed the broader market so far this year, but the financials sector was the S&P 500's weakest-performing one last year.

While the Goldman results supported financial shares, the IMF's willingness to bolster its crisis-fighting resources gave the sector a big push. Financials had suffered throughout 2011 on worries that Europe's debt crisis would hit banks globally.

"Any time liquidity is added to the financial system, it gives financials a little bit of breathing room, and it will result in higher prices for the banks," said Kevin Caron, market strategist at Stifel, Nicolaus & Co, in Florham Park, New Jersey.

The IMF is seeking to boost its war chest by USD 600 billion to help countries reeling from the crisis, even though some nations insist Europe must first do more to support ailing members, according to sources.

Home builders' shares surged after data showed US homebuilder sentiment unexpectedly jumped in January to its highest level in 4-1/2 years. The PHLX housing index .HGX climbed 3.1 percent, while the Dow Jones home construction index .DJUSHB rose 4.4 percent.

The Dow Jones industrial average .DJI rose 96.88 points, or 0.78 percent, to close at 12,578.95. The Standard & Poor's 500 Index .SPX added 14.37 points, or 1.11 percent, to 1,308.04. The Nasdaq Composite Index .IXIC climbed 41.63 points, or 1.53 percent, to close at 2,769.71.

Xilinx and altera late

After the bell, shares of chipmakers Xilinx (XLNX.O) and Altera (ALTR.O) rose following their earnings reports. Xilinx was up 7 percent from its close of USD 35.30 and Altera was up 5.1 percent from its close of USD 40.72.

An index of semiconductor shares .SOX climbed 5 percent during the regular session. Intel (INTC.O) is expected to report results on Thursday.

Despite the optimism over the IMF, investors watched cautiously as Greece and its creditors resumed negotiations on terms of a planned debt swap, hoping to overcome an impasse in talks and stave off a painful default.

The benchmark S&P 500 closed above 1,300, a key resistance point that analysts said signal more room to rally if the index stays there.

Within the tech sector, Yahoo Inc (YHOO.O) jumped 3.2 percent to USD 15.92 a day after co-founder Jerry Yang said he was severing all formal ties with the company he started in 1995. Shareholders had blasted Yang for impeding investment deals that could have transformed the Internet media group.

In other bank results, Bank of New York Mellon Corp (BK.N) slid 4.6 percent to USD 20.30 after the world's No. 1 custody bank said fourth-quarter earnings fell.

Another big custody bank, State Street Corp (STT.N) slid 6.6 percent to USD 39.95 after saying it accelerated an expense- control program, a sign it still sees continued weakness in global capital markets.

Financial results will remain in the spotlight, with reports from Bank of America Corp (BAC.N) and Morgan Stanley (MS.N) later this week. Bank of America's stock gained 4.9 percent to USD 6.80 and Morgan Stanley's shares were up 6.8 percent at USD 17.35.

"As we've seen, investment banking revenues have been very weak, and we think that's going to be a trend that continues and (there's) also a lot more exposure to Europe in those banks," said Dan Neuger, portfolio manager, head of US and Europe active equities for PineBridge Investments in New York, which has about USD 70 billion in assets.

In terms of investing, "we don't like the large money-center banks. That's one area we've been away from," he said. "Where we think there is more value is in the regional, more domestically focused smaller banks."

Volume totaled about 7.3 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of 6.68 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 4 to 1 while on the Nasdaq, More than three stocks rose for every one that fell.

Bureau Report

First Published: Thursday, January 19, 2012 - 09:21
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