Retail figures drive US markets rally

US stocks posted their biggest gains in nearly two months yesterday as retail sales figures allayed fears over the economy that had driven a six-week slump in the market.

Many analysts said the rally was likely a one-day wonder. Though still weak, the retail sales data was not as bad as most had expected, which provided an excuse to buy after the market had neared its most oversold conditions in a year.

“It’s the long-term trend which is still disturbing,” said Alan Valdes, director of floor operations at DME Securities in New York. “If you look at the S&P 500, they’ve lost over $1 trillion (£610bn) in value since the beginning of May - that is telling.

“We were so oversold you had to see a plus day.”

Many headwinds remain, including concerns over debt problems in Europe and the United States, along with the expiration at the end of this month of the US Federal Reserve’s bond-buying program, which has been a key source of liquidity for markets.

US retail sales declined for the first time in 11 months in May, but the fall was less than forecast. For details, see China data also helped to ease worries about global growth.

Gains were spread across the board, with the Morgan Stanley retail index, up 2.8 per cent, among the best performers. Energy also outperformed, with the S&P energy sector up 2 per cent as oil prices rose.

JC Penney jumped 17.5 per cent to $35.37 after the department store chain named Ron Johnson, Apple’s senior vice president of retail, as its new chief executive.

The Dow Jones industrial average gained 123.14 points, or 1.03 per cent, to 12,076.11. The Standard & Poor’s 500 Index rose 16.04 points, or 1.26 per cent, to 1,287.87. The Nasdaq Composite Index advanced 39.03 points, or 1.48 per cent, to 2,678.72.

Expectations for further selling this summer hovered in the background even as the market rallied.

Many investors are eyeing a possible retreat in the S&P 500 to its March low near the 1,250 level. The index closed flat on Monday after falling to near a three-month low last Friday.

That level could be seen as a near-term bottom and attract additional buyers, analysts have said.

The S&P 500 is down about 5.4 per cent from its high in early May as recent weak data sparked worries about the sustainability of an economic recovery.