Stocks surge on investors’ relief
NEW YORK – As far as Wall Street is concerned there is no bad news anymore.
At least for now, traders are seeing news about longtime trouble spots like banking and unemployment in a strictly positive light.
Surging bank stocks have lifted the Standard & Poor’s 500 index a dizzying 37.4 percent since early March, when the benchmark for many mutual funds and other investments skidded to a 12-year low. The index is still down 40.6 percent from its high in October 2007.
“We trust the rally,” said Chris Hyzy, chief investment officer at US Trust. He said the rapid climb since March 9 is justified because investors are no longer running from worries about a possible depression.
On paper, U.S. stocks have gained nearly $2.9 trillion in value since the rally started.
The latest fuel for the ascent came from news that job losses slowed in April and that big banks don’t need as much capital as some investors had feared.
The Labor Department said employers cut 539,000 jobs last month – the fewest in six months and much fewer than analysts had expected.
Bank shares surged after the government released report cards on the nation’s 19 largest financial institutions. With the “stress tests” results out and easing fears about the stability of banks, investors could check another item off their list of worries.
“Getting past the stress tests was a milestone,” said Jim Dunigan, managing executive of investments for PNC Wealth Management. “That was a cloud hanging over our head for the past several months. The good news is there were no surprises.”
The dissipating worries sent the Dow charging higher by 164.80 points, or 2 percent, to 8,574.65. The Standard & Poor’s 500 index rose 21.84, or 2.4 percent, to 929.23, and the Nasdaq composite index rose 22.76, or 1.3 percent, to 1,739.00.
The Dow closed the week up 362.24, or 4.4 percent, at 8,574.65. The Standard & Poor’s 500 index rose 51.71, or 5.9 percent, to 929.23. The Nasdaq composite index rose 19.80, or 1.2 percent, to 1,739.00.
The Russell 2000 index, which tracks the performance of small company stocks, rose 12.37, or 2.5 percent, for the week to 511.82.
The Dow Jones U.S. Total Stock Market Index – which measures nearly all U.S.-based companies – ended at 9,509.08, up 510.35, or 5.7 percent, for the week. A year ago, the index was at 14,121.06.
Bank stocks drove Friday’s advance. Investors were relieved that 10 of the 19 companies will need to raise about $75 billion in new capital as a buffer against losses if the economy worsens.
“If anything, the market is reading this more as a sign of approval than a bad sign for the weaker banks,” said Jim Sinegal, equity analyst at Morningstar.