Wall St edges into positive territory

US stocks closed out the worst month in more than a year on an up note yesterday, with sharp gains in the last several days still not enough to repair the damage from a US credit downgrade and fears of a slide back into recession.

Sentiment turned dramatically in recent days on expectations the Federal Reserve will again intervene to support the economy. With yesterday’s gains, the Dow was back in positive territory for 2011.

Banks led a late-day surge, helping to extend a four-day rally, followed by industrial shares. JPMorgan Chase rose 1.3 per cent to $37.56 while Caterpillar Inc was up 1.3 per cent at $91.00.

Minutes from the most recent Fed policymakers’ meeting released on Tuesday that indicated several Fed members favored more monetary easing bolstered the appetite for equities.

“The market has been somewhat schizophrenic lately, but the idea of more stimulus lets you put a rosy spin on everything,” said Steve Sosnick, equity-risk manager at Timber Hill/Interactive Brokers Group.

The Dow Jones industrial average finished up 53.58 points, or 0.46 per cent, at 11,613.53. The Standard & Poor’s 500 Index was up 5.97 points, or 0.49 per cent, at 1,218.89. The Nasdaq Composite Index was up 3.35 points, or 0.13 per cent, at 2,579.46.

The S&P 500 rose in seven of the past eight sessions for total gains of 8.5 per cent, led by sectors tied to economic growth.

For August, though, the S&P fell 5.7 per cent, its worst month since May 2010. The Dow fell 4.4 per cent in August while the Nasdaq slumped 6.4 per cent. It was the fourth straight down month for all.

Equities yesterday were volatile late in the session, turning briefly negative before snapping back into positive territory. Still, the volatility did not compare to early in the month, when Wall Street was marked by massive swings of more than three per cent.

“The market has no conviction one way or the other, and the low volume exaggerates all the moves we get,” said Carl Kaufman, who helps manage just under $2bn at the Osterweis Strategic Income fund

Tech shares weighed on the Nasdaq, with Apple off 1.3 per centand chipmaker Nvidia Corp down 2.7 per cent.

Industrial stocks were among the top gainers, with the S&P industrials index up 0.7 per cent. Honeywell International gained 1.1 per cent.