Written by Reuters
Tuesday, 17 November 2009 06:50
NEW YORK: US stocks rose broadly on Monday, Nov 16, sending indexes to fresh 13-month closing highs, after Federal Reserve Chairman Ben Bernanke reinforced expectations that interest rates would stay low to spur growth, according to Reuters.
Bernanke repeated that the Fed was likely to keep interest rates exceptionally low for "an extended period," a pledge that weighed on the U.S. dollar and drove investors to snap up shares of natural resource companies as prices of global commodities -- from gold to wheat -- shot higher.
In a speech before the Economic Club of New York, Bernanke said the recovery would not be as robust as previously hoped, and rising unemployment and tight bank lending were significant headwinds.
The S&P materials and energy indexes each climbed more than 2.3 percent. Individual stock standouts included Exxon Mobil Corp, up 2.7 percent to US$74.43 amid higher crude oil prices, and Caterpillar Inc up 2.8 percent.
"The overriding message from Bernanke is that interest rates will stay low and remain low for the near to medium term. It seems that the market likes that," said Dennis Cajigas, senior market strategist at Lind-Waldock, a retail brokerage firm in Chicago.
"Investors essentially are borrowing against low rates in the dollar and putting that money in areas that they feel will react well against inflation, such as crude oil, energy, gold, commodities (and) stocks because the expected return should be higher over time."
In the last hour of trading stocks briefly pared gains as Meredith Whitney, a prominent analyst, said in a CNBC television interview the stock market run-up was not supported by fundamentals.
The Dow Jones industrial average gained 136.49 points, or 1.33 percent, to 10,406.96. The Standard & Poor's 500 Index shot up 15.82 points, or 1.45 percent, to 1,109.30 -- its first close above the psychologically important 1,100 level for the first time since October 2008.
The Nasdaq Composite Index jumped 29.97 points, or 1.38 percent, to 2,197.85.
The benchmark S&P 500 is now up 64 percent since the 12-year closing low of March 9.
Caterpillar, whose fortunes are closely tied to the commodities industries, was one of the biggest boosts to the Dow, along with Boeing Co, up 3.6 percent to US$52.48.
Shares of AK Steel Holding Corp rose 7.9 percent to US$18.77, while gold miner Newmont Mining Corp added 2.8 percent to US$52.39. The ARCA gold bugs index HUI jumped 3.3 percent after COMEX December gold hit a record above US$1,140 an ounce.
On Nasdaq, Intel Corp shares rose 2.2 percent to US$20.25 after the chipmaker raised its quarterly dividend by more than 12.5 percent. The semiconductor index climbed 2 percent.
Monday's economic data showed October retail sales rose a brisk 1.4 percent last month but were much less impressive with auto sales stripped out. In addition, September figures were revised to show a larger drop overall than earlier reported.
Even though Bernanke made a rare statement on foreign exchange markets, saying the Fed was watching the U.S. dollar closely, the greenback found very little reprieve. - Reuters
