New York Report: S&P soaring as investors bet on economy

THE S&P 500 index climbed to its third record closing high in four sessions yesterday as traders shrugged off data that showed the economy shrank in the first quarter and bet on improvement in the second quarter.

New claims for unemployment benefits fell more than expected last week, pointing to a strengthening labour market and giving investors a reason to buy US stocks. Data from the Commerce Department showed that gross domestic product contracted for the first time in three years in the first quarter, although signs indicated it has rebounded.

“The headline figure was weaker than expected, but it was mainly due to slower inventory growth, which bodes well for future growth, future orders, new orders,” said Jeffrey Saut, chief investment strategist at Raymond James Financial in St Petersburg, Florida.

The S&P 500 gained 10.25 points or 0.54 per cent, to 1,920.03 – a record close and a lifetime intraday high.

Citi analysts said the US economy could grow nearly four per cent in the second quarter of the year. Goldman Sachs raised its estimate to 3.9 per cent.

The Dow Jones industrial average rose 65.56 points or 0.39 per cent, to 16,698.74. The Nasdaq Composite added 22.87 points or 0.54 per cent, to 4,247.95.

The US 10-year Treasury note yield touched 2.4 per cent, its lowest level since last June, on expectations of further policy easing by the European Central Bank next week. Low yields could keep pulling investors into dividend-paying stocks.