U.S. stocks advanced, extending yesterday’s rally in the Standard & Poor’s 500 Index after a five-day selloff, on speculation central banks will support growth even as the American economy shows signs of strength.
The S&P 500 added 1.4 percent to 2,053.97 at 10:30 a.m. in New York, after rallying 1.2 percent Wednesday for the biggest gain in three weeks. The index climbed back above its average price for the past 50 days, and trimmed its loss for the year to 0.3 percent. The Dow Jones Industrial Average jumped 249.22 points, or 1.4 percent, to 17,833.74, erasing its loss for 2015. Trading in S&P 500 companies was 14 percent above the 30-day average for this time of the day.
“The New Year hangover has finally cleared,” said Justin Urquhart Stewart, who helps oversee about $10 billion at Seven Investment Management LLP in London. “Yesterday’s turnaround broke the negative line of falls and has given a chance to push back against poor sentiment. There should be a positive fillip to the market.”
The S&P 500 has gained 2.5 percent over two days, following the worst start to a year since 2008. The benchmark index has recovered more than half its losses after tumbling 4.2 percent over the previous five days as crude oil plunged below $48 a barrel for the first time since 2009.
Equities rallied yesterday on relief that Federal Reserve minutes signaled no change in interest-rate policy and optimism over employment growth. Most central bank officials agreed their new policy guidance means they are unlikely to raise interest rates before late April and a number expressed concern inflation could remain too low.
The minutes also showed some Fed officials are concerned about risks posed by overseas economies. Policy actions by foreign central banks may help, the minutes said.
A ‘Catastrophe’
Those sentiments were echoed in comments Wednesday by Fed Bank of Chicago President Charles Evans.
“I don’t think we should be in a hurry to increase interest rates,” Evans said during a discussion with Lars Peter Hansen, a Nobel prize-winning economist at the University of Chicago. Later in the presentation, Evans said such a move to tighten too soon would be a “catastrophe.”
Stocks extended gains after European Central Bank President Mario Draghi said in a letter published today that central bank stimulus measures may include sovereign-bond buying. Producer prices slid more than analysts anticipated in the euro area and German factory orders fell more than forecast in November, underlining the fragile state of Europe’s economy and strengthened the case for more stimulus.
The next interest-rate decision by the ECB is scheduled for Jan. 22 when officials will consider a quantitative-easing package that will probably include buying government bonds. Policy makers disagree about whether action is required, with some arguing deflation risks have increased and others pointing to the stimulating effects of lower prices on the economy.
Jobs Report
The weakness overseas contrasts with growing signs of strength in the U.S. Data today showed fewer Americans filed for unemployment benefits last week. Jobless claims decreased by 4,000 to 294,000 in the week ended Jan. 3, the Labor Department said today in Washington.
Labor Department figures tomorrow are projected to show payrolls climbed by 240,000 in December, which would put the gain in employment for all of 2014 at 2.89 million, the most since 1999, according to the median estimate of economists surveyed by Bloomberg. The jobless rate is forecast to drop to 5.7 percent, making it the lowest since June 2008.
“Domestically, we’re looking pretty good,” Walter Todd, who oversees just over $1 billion as chief investment officer for Greenwood, South Carolina-based Greenwood Capital Associates LLC, said by phone. “The swing factor is will Europe will be able to recover and what will the ECB do later this month?”
All 10 major groups in the S&P 500 rose today. Raw-materials, technology and energy shares rallied more than 1.5 percent.
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