Bullish comments boost US markets
US stocks rallied more than 2 per cent yesterday as bullish comments on financial sector performance from analyst Meredith Whitney lifted hopes that banks’ quarterly results may be stronger than expected.
Light volumes made it easier for stocks to post such a big move, analysts said. The Dow industrials and S&P 500 had their best gains since June 1.
Whitney, who has in the past been bearish, also upgraded Goldman Sachs to a “buy” this morning, driving its stock up 5.3 per cent to $149.44. The S&P Financial Index, meanwhile, jumped 6.5 per cent.
In comments to CNBC television, Whitney said bank shares were in for at least a short-term gain of 15 per cent and that major financials, including Bank of America and JPMorgan Chase, which along with Goldman are scheduled to report results this week, could do well in the second quarter.
Her comments offset concerns that CIT Group, a lender to many small- and mid-sized businesses, was struggling to stay afloat.
The Goldman Sachs upgrade “kind of turned sentiment around short-term. It was enough to send the market up,” said Fred Dickson, market strategist at D.A. Davidson. “Basically, people are putting a little bit of money on the table ahead of earnings this week.”
Dickson also said the gains come on the heels of four straight down weeks for the Dow and S&P 500, suggesting the market had become oversold.
The Dow Jones industrial average rose 185.16 points, or 2.27 per cent, to end at 8,331.68. The Standard & Poor’s 500 Index was up 21.92 points, or 2.49 per cent, at 901.05. The Nasdaq Composite Index was up 37.18 points, or 2.12 per cent, at 1,793.21.
Stronger-than-expected first-quarter bank earnings prompted sharp gains in the sector’s stocks and helped fuel a rally of as much as 40 per cent in the S&P 500 from March through May.
With second-quarter results, investors will be looking for evidence or upbeat comments from companies that suggest the US economy is getting better.