U.S. stocks surged to 13-month highs on Monday, extending a global rally on a weaker dollar and encouraging economic news. The dollar slid after Federal Reserve Chairman Ben Bernanke said the Fed was closely watching the currency's value.
Gold futures reached record highs, while crude oil futures rose on the weaker greenback.
The market was also eying news from Asia. The 21 Asia-Pacific Economic Cooperation member nations agreed to maintain stimulus plans until their economies strengthen during a meeting in Singapore. Japan's third-quarter gross domestic product rose 1.2%, exceeding expectations.
On Monday, the 30-stock Dow Jones industrial average finished higher by 136.49 points, or 1.33%, at 10,406.96. The broad Standard & Poor's 500-stock index was up 15.82 points, or 1.45%, at 1,109.30. The tech-heavy Nasdaq composite index gained 29.97 points, or 1.38%, to 2,197.85.
On the New York Stock Exchange, 25 stocks were higher in price for every six that declined. Breadth on the Nasdaq was 21-6 positive.
Among industry groups scoring gains in Monday's session, the S&P Wireless Telecommunication Services index rose 5.35% after a Credit Suisse analyst upgraded Sprint Nextel (S) to outperform from neutral.
The S&P Education Services index gained 3.93% after Apollo Group (APOL) said its University of Phoenix unit had been recertified for participation in federal student financial aid programs under Title IV of the Higher Education Act for three years.
The S&P Steel index climbed 3.99% after JPMorgan reportedly added AK Steel (AKS) and U.S. Steel (USX) to its focus list, saying "the market is pricing in too negative an outlook for the two companies."
Treasuries were higher after Federal Reserve Chairman Ben Bernanke's speech Monday afternoon. Bernanke looks for continued growth, and believes the current pick-up is more than just a function of temporary factors. However, he said there are still "headwinds" to a recovery.
The U.S. dollar index fell to 74.947. Bernanke said policy actions will help keep the dollar strong, while reiterating the dovish language from recent policy statements. He did note that the value of the dollar has moved over a wide range over the past year. Bernanke said that when financial stresses were most pronounced, the flight to the safety of the dollar boosted it markedly, but now safe haven flows have abated. He indicated that the Fed will continue to monitor these developments closely.
December gold futures were up at a record $1,140 per ounce.
December West Texas Intermediate crude oil futures rose to $78.85 per barrel.
European stocks climbed along with Wall Street, finishing Monday's session with solid gains. London's FTSE 100 index rose 1.63%, the CAC 40 index in Paris gained 1.50%, and German's DAX index advanced 2.07%.
Asian markets also finished in the green. Tokyo stocks rose 0.21%, Hong Kong gained 1.73%, and Shanghai climbed 2.74%.
Shares of home improvement chain Lowe's Companies (LOW) were lower after the company reported third-quarter earnings per share (EPS) of 23 cents, vs. 33 cents one year earlier, on a 7.5% same-store sales drop and a 3% total sales drop.
In M&A, Cisco Systems (CSCO) raised its bid for video-conferencing gear maker Tandberg ASA of Norway to $3.39 billion.
Goldman Sachs analysts boosted Nordstrom (JWN) to a buy, while slashing J.C. Penney (JCP) J.C. Penney to a sell.
In economic news Monday, U.S. business inventories fell 0.4% in September, better than the 0.6% drop expected, but after a 1.6% decline the month before (downwardly revised from a 1.5% drop). Business sales fell 0.3%, after rising 1.1% the month before. Retail inventories were up 0.6% after falling 2.6% in August. The inventory-sales ratio held at 1.32 in September.
U.S. retail sales rose 1.4% in October, while the ex-auto component edged up only 0.2%. September's 1.5% decline was revised down to -2.3%, and the 0.5% increase in the ex-auto figure was revised down to 0.4%. (August's 2.2% gain was revised up to 2.4% and 1.0% ex auto gain was revised down to 0.8%). Excluding gas station sales, autos, and building materials, sales were up 0.5% following a 0.4% increase previously (revised from 0.5%).
The U.S. Empire State index slipped to 23.5 in November after surging nearly 16 points to 34.6 in October as the pace of business activity slowed a bit from last month's hefty pace. The employment index fell to 1.3 after jumping out of contractionary territory and improving to 10.4 in October.
Kansas City Fed President Thomas Hoenig, speaking in Abu Dhabi, said that all financial institutions needed to be allowed to fail, no matter their size. "As we look at reform and the way forward I think the most important think we need to do is to make first of all an accurate assessment of fundamental weaknesses in our financial system and then begin to create better foundations," he said. "Our institutions must be allowed to fail no matter what their size or political influence," he said.
China's top banking regulator issued a sharp critique of U.S. financial management only hours before President Barack Obama commenced his first visit to the Asian giant, highlighting economic and trade tensions that threaten to overshadow the trip. Liu Mingkang, chairman of the China Banking Regulatory Commission, said that a weak U.S. dollar and low U.S. interest rates had led to "massive speculation" that was inflating asset bubbles around the world. It has created "unavoidable risks for the recovery of the global economy, especially emerging economies," Liu said. The situation is "seriously impacting global asset prices and encouraging speculation in stock and property markets."
General Motors Co., the successor to the automaker that slid into bankruptcy this year, said it lost $1.15 billion in the third quarter after its July 10 exit from a U.S.-backed restructuring. GM, 61% owned by the U.S. government, said its operations generated $3.3 billion in cash and ended September with $42.6 billion on hand. Repayment of U.S. and Canadian government loans will start this quarter, GM said today.
In other company news Monday, Bristol-Myers Squibb (BMY) announced it will split off its holdings in Mead Johnson Nutrition Company. The split-off is expected to be net cash flow positive to the BioPharma business and accretive to EPS beginning in 2010. In the exchange offer, Bristol shareholders can exchange some, none or all of their shares of company common stock for shares of Mead Johnson common stock.
Abbott Laboratories (ABT) said results from a study showed patients at high cardiovascular risk had "significant" regression of atherosclerosis after 8-14 months of therapy with Abbott's Niaspan plus statin, the study's primary endpoint. A secondary endpoint: Treatment with Niaspan plus statin also resulted in "significantly" fewer major adverse cardiac events vs. ezetimibe (Merck's Zetia) plus a statin. Merck said the Abbott study doesn't have the "rigor or size to provide meaningful insight" into the effect of either drug.
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