U S stocks rose for a third straight day yesterday, pushing the S&P above 1,400 for the first time since early May, on growing optimism the European Central Bank (ECB) would act soon to contain the Eurozone’s debt crisis.
Trading was light, which could distort the level of optimism investors truly have that Europe will follow through with adequate measures. ECB president Mario Draghi boosted hopes last week when he spoke of restoring calm to the Eurozone’s troubled bond markets.
Since then, good news from Greece and declines in borrowing costs for Spain and Italy from peaks above seven per cent have kept sentiment positive. The relative calm allowed the S&P to break through the psychologically important 1,400 level after trying unsuccessfully in the last two sessions.
Yesterday’s advance was led by stocks in cyclical sectors like energy, materials and consumer discretionary, while defensive sectors like telecoms and utilities edged lower.
The Dow Jones industrial average rose 51.09 points, or 0.39 per cent, at 13,168.60. The Standard & Poor’s 500 Index was up 7.12 points, or 0.51 per cent, at 1,401.35. The Nasdaq Composite Index was up 25.95 points, or 0.87 per cent, at 3,015.86.
Despite worries over the economies of Europe and the United States, investors have pushed the S&P 500 up more than 11 per cent so far this year. Yield-hungry investors have kept buying stocks as US and German government bond prices soar and yields hit historic lows.
“If the ECB expands its balance sheet, it will keep pushing these bond yields lower, which can help these countries finance their debt, giving markets a bit of reprieve,” said Joseph Tanious, global market strategist at JP Morgan Funds. “It’s likely we won’t get anything official for a few weeks, and until then investors are likely to be skittish.”
Summer holidays have added to light trading volume, which has contributed to volatility. Equities cut their gains just before the close yesterday, mirroring Monday’s late-day action.
About 62 per cent of stocks on the New York Stock Exchange closed higher while 61 per cent of Nasdaq-listed stocks finished up.
Banking shares rose 0.5 per cent, lifted by Morgan Stanley, which was up 2.5 per cent, while watch and fashion accessory maker Fossil soared 32 per cent after it forecast growth in Asia and Europe.
About 6.39bn shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year’s daily average of 7.84bn.