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S&P 500 Rallies to 4-Year High on ECB Bond Plan, US Jobs Data

Thursday, 06 September 2012 10:50 AM

The S&P 500 index leapt to its highest level in more than four years and the Nasdaq also jumped more than 2 percent on Thursday, as investors lauded a new bond-buying program in Europe aimed at containing the region's debt crisis and signs of improvement in the U.S. labor market.

The rally was broad, with banks and semiconductor stocks in the lead. Advancers outnumbered decliners by a ratio of more than 4 to 1. The Dow Industrials had their biggest gain in two months as shares of Walt Disney Co. hit an all-time high.

ECB President Mario Draghi, seeking to back up his July pledge to do whatever it takes to preserve the euro, said the central bank's new plan of potentially unlimited bond-buying would address bond market distortions and "unfounded" fears of investors about the survival of the euro.

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Private employers added much more jobs in August and new claims for jobless benefits fell last week to the lowest level in a month, data showed. A separate report said the pace of growth in the massive services sector rose in August.

Friday's government payrolls report looms as the next test for markets. Investors will scrutinize the details for clues as to when the Federal Reserve may provide more stimulus to prop up economic growth.

"Clearly, the announcement out of the ECB...as well as the very encouraging jobs data here domestically all helped fuel an already buoyant market," said Joseph Greco, managing director at Meridian Equity Partners in New York.

The Dow Jones Industrial Average gained 244.52 points, or 1.87 percent, to end at 13292.00. The Standard & Poor's 500 Index gained 28.68 points, or 2.04 percent, to 1432.12 , its highest level since May 2008. The Nasdaq Composite Index gained 66.54, or 2.17 percent, to 3135.81.

The ECB's program, which Germany's Bundesbank is known to have opposed, would focus on bonds maturing within three years and was strictly within the ECB's mandate. Draghi said only one member of the ECB Governing Council had dissented.

"It's definitely giving more comfort to the market. It was what the market was looking for, and we can see that the yields on Italian, Spanish and Portuguese bonds have already come down," said Rex Macey, CIO of Wilmington Trust Investment Advisors.

Earlier, the ECB also announced that it will keep its main interest rate at a record low of 0.75 percent, holding fire after a pick-up in inflation last month offset pressure to breathe life into the flagging euro zone economy by easing borrowing costs.

In company news, Supervalu Inc. said it would close about five dozen stores as it works to turn around its grocery business, which lags Kroger Co. and Wal-Mart Stores Inc. The stock rose 3.5 percent.

Realty Income Corp. plans to acquire American Realty Capital Trust Inc. for about $1.93 billion as it looks to diversify its portfolio outside of the retail industry. Shares of Realty Income slipped 0.6 percent, while American Realty Capital Trust rose 2 percent.

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Thursday, 06 September 2012 10:50 AM
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