Sharp rise on US markets
Good news over hiring and retail sales helped send the US stock market sharply higher yesterday.
For investors, the pair of government reports offered more encouragement that the US economic recovery will continue, even as Europe and Japan struggle. The Standard & Poor’s 500 index gained 23.84 points, or 1.5%, to 1,636.36.
The gains were broad. All 10 industry groups within the S&P 500 rose, led by retailers and other consumer-discretionary companies. Newspaper publisher Gannet soared 34%, the most in the S&P 500, on news that it would buy another media company, Belo.
“The underlying fundamentals of our economy are clearly doing much better,” said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts.
The Dow Jones industrial average rose 180.85 points, or 1.2%, to 15,176.08. The Nasdaq composite rose 44.93 points, or 1.2%, to 3,445.36.
Markets have turned turbulent over the past three weeks. The S&P 500 climbed 17% from the start of the year and hit an all-time on May 21. The index began sliding the next day when the Federal Reserve said it would consider pulling back its support for the economy this year.
It has been a bumpy ride lower. The index has been as high as 1,669 and as low as 1,608 over the past three weeks, a wide trading range of 3.6 percent.
Investors have been debating when the Fed will begin slowing its bond purchases, and they have been worrying about the results. They could get a better sense next Wednesday, when the bank releases its policy statement and Fed Chairman Ben Bernanke holds another press conference.
“A lot of investors are worried about the Fed,” said Bob Baur, chief global economist at Principal Global Investors in Des Moines, Iowa. “That’s going to create a bumpy market at least until they get some clarity on that. But we really think the US is in pretty good shape.”
Mr Baur thinks the US economic recovery will pick up speed later this year, which could help push corporate earnings and the stock market higher.
The latest positive news came early yesterday when the government said the number of Americans seeking unemployment benefits fell to 334,000, below what economists had expected.
Jim O’Sullivan, chief US economist at High Frequency Economics, wrote in a note to clients that the government’s weekly numbers, while volatile, “continue to signal an improving labour market”.
The government also reported that US retail sales increased 0.6% in May from April. That’s up from a 0.1% gain in April and the fastest pace since February.
In Japan, the benchmark Nikkei 225 index slumped 6.4% as doubts grew that Prime Minister Shinzo Abe’s economic turnaround plan will succeed. The Japanese market is down 20% from a recent high reached on May 22, the definition of a bear market.
That decline followed an extraordinary surge from mid-November to late May, when the Nikkei soared 80% as investors hoped Japan would finally emerge from its two-decade economic slump.
