Markets soar on Citigroup report
Wall Street began the week with a strong start Monday as better-than-expected profits at Citigroup Inc. and a healthy increase in consumer spending renewed investors’ optimism about the economy. The Dow Jones industrials soared more than 100 points.
Earnings reports begin arriving at a steady clip this week, giving investors fresh indications about companies and the overall economy. This week nearly half the 30 companies that make up the Dow industrials report results.
While investors have been girding for a slowdown in growth of corporate profits, they are hoping consumer spending will remain robust. The Commerce Department on Monday reported that consumers spent strongly last month, sending retail sales up by about 0.7 percent. The figure was close to what analysts predicted, and up from a revised 0.5 percent increase in February.
Investors were also pleased by news of a buyout of SLM Corp., the student lender better known as Sallie Mae. SLM agreed to be sold to two private investment funds and J.P. Morgan Chase & Co. and Bank of America Corp. for $25 billion, or $60 per share. Sallie Mae rose $8.29, or 17.7 percent, to $55.05.
But analysts warned that Wall Street’s good humor was unlikely to last. Robert N. Schaeffer, portfolio manager at Becker Value Equity Fund, contends that a pop in stocks is typical when earnings reports begin to flow in and are better than expected.
“The positive reaction to the earnings tends to be short-lived traditionally,” he said. “There is also a tendency for companies with better earnings reports to report early. The companies that are going to disappoint tend to drag their feet a bit.”
The Dow Jones industrial average rose 108.33, or 0.86 percent, to 12,720.46. The Dow’s increase Monday put the blue chip average back above where it stood before the major U.S. indexes fell more than 3 percent on Feb. 27 as part of a worldwide selloff. The Dow is within about 66 points of its all-time closing high of 12,786.64, reached Feb. 20.
Broader stock indicators also rose. The Standard & Poor’s 500 index rose 15.62, or 1.08 percent, to 1,468.47, a six-and-a-half-year high. The Nasdaq composite index rose 26.39, or 1.06 percent, to 2,518.33.
Bonds advanced, with the yield on the benchmark 10-year Treasury note falling to 4.74 percent from 4.77 percent late Friday. The dollar traded near all-time lows versus the euro and was mostly lower against other major currencies.
Oil prices fell Monday, with a barrel of light sweet crude settling down 2 cents at $63.61 on the New York Mercantile Exchange. Gold prices rose.
Economic reports competed with earnings news for investors’ attention Monday. The Commerce Department reported businesses increased their inventories by 0.3 percent in February, the largest increase in five months. The New York Federal Reserve also reported that its regional manufacturing activity expanded slightly in April, with the overall index rising to a reading of 3.80 from an unrevised reading of 1.85 in March. Also, the National Association of Home Builders’ index – a measure of confidence of U.S. home builders – fell to 33 from 36 in March for sales of new, single-family homes.
Advancing issues outnumbered decliners by more than 2-to-1 on the New York Stock Exchange, where volume came to 1.55 billion shares compared with 1.41 billion shares traded Friday.
The Russell 2000 index of smaller companies rose 12.06, or 1.47 percent, to 831.44.
Overseas, Japan’s Nikkei stock average closed up 1.52 percent. Britain’s FTSE 100 closed up 0.83 percent, Germany’s DAX index rose 1.75 percent, and France’s CAC-40 advanced 1.25 percent.
The sometimes-volatile Shanghai Composite Index, whose nearly 9 percent decline Feb. 27 helped touch off the global pullback, rose 2.22 percent.