The recent run of better than expected economic data around the world, though still not suggesting a booming expansion, has helped lift equity markets as investors move away from a worst-case scenario for the global economy.
An index of the US manufacturing sector rose in January to its highest level since June, an industry group said, while China’s factory sector expanded slightly, confounding expectations of a contraction. Germany recorded its first rise in manufacturing output in four months.
“The numbers aren’t horrible, the trend continues that the news is OK,” said Brian Battle, vice-president of trading at Performance Trust Capital Partners in Chicago. “I think we’re going to grind higher.”
Optimism spurred gains in industrials, financials and basic materials, which rose 1.1-1.7 per cent. Caterpillar Inc, a company heavily exposed to global industry, rose 1.3 per cent to US$110.52 and was the biggest boost to the Dow industrials.
Trading volume was higher than it has been in recent days. Volume of the NYSE, Amex, and Nasdaq was 7.80 billion compared with its 20-day moving average of 6.97 billion. The wider participation comes after four down days when market movements were minimal and volume generally light.
Stocks also got a boost after Greek Finance Minister Evangelos Venizelos said talks between Athens and its private creditors were “one formal step away” from a deal needed to avoid a messy default. Such a deal would be a significant step in removing one of the biggest worries for investors.
US and European banks rallied on the news. Bank of America Corp gained 3.2 per cent to US$7.36 and Citigroup rose 2.9 per cent to US$31.60.
The Dow Jones industrial average gained 83.55 points, or 0.66 per cent, to 12,716.46. The Standard & Poor’s 500 Index rose 11.67 points, or 0.89 per cent, to 1,324.08. The Nasdaq Composite Index climbed 34.43 points, or 1.22 per cent, to 2,848.27.
After the S&P 500 rose 4.4 per cent last month, some strategists see the benchmark approaching a short-term top. The index could be “near the upper end of a trading band”, with a top around 1,350, according to John Manley, chief equity strategist at Wells Fargo Funds Management in New York.
“I’d rather own stocks than not, but on a year horizon,” he said, indicating equities could pull back in the near term.
Homebuilder shares advanced after US data showed construction spending surged in December to its highest level in more than one-and-a-half years. An index of housing stocks rose 1.8 per cent. Shares in PulteGroup Inc, the second-largest US homebuilder, rose 5.1 per cent to US$7.83.
Amazon.com Inc slid 7.7 per cent to US$179.46 a day after the online retailer warned of a possible first-quarter loss and posted a steep drop in fourth-quarter profit.
According to Thomson Reuters data, with 228 companies having reported results, 61 per cent have beaten expectations — below the 70 per cent beat rate of recent quarters.
Whirlpool Corp surged 13.5 per cent to US$61.64 after giving an optimistic full-year outlook.
US Treasuries prices fell yesterday as European risk assets improved, dampening demand for the safe-haven bonds, and as buying ebbed following a day of large month-end purchases.
Depressed Treasury yields, which point to caution on the part of investors, have been a reason for some to distrust a gain in stocks predicated on signs of an improving economy.
Morgan Stanley shares gained 4 per cent to US$19.39 on being selected one of five bookrunners to handle Facebook’s US$5 billion (RM15.2 billion) initial public offering. — Reuters
