US STOCKS rallied yesterday as better-than-expected results from the number two US home improvement retailer, Lowe’s, helped spark broad-based buying on hopes the recession is easing and consumer spending is stabilising.
Investors’ optimism extended to sectors closely aligned with economic growth, including homebuilders, banks, energy companies and retailers. Positive broker comments on Bank of America, up nearly 10 per cent at $11.73, boosted financial shares, while rising oil prices improved the outlook for energy names.
Shares of Lowe’s rose 8.1 per cent to $19.94 after the company raised its full-year forecast due to signs that the housing market’s decline may be ebbing. Lowe’s chief executive Robert Niblock said consumer confidence has improved in recent weeks, and housing turnover is showing “signs of a bottom.”
That optimism helped lift shares of Lowe’s top rival Home Depot, which added 6.6 per cent to $26.02 a day before the Dow component is set to deliver its own quarterly scorecard.
The Dow Jones industrial average gained 235.44 points, or 2.85 per cent, to 8,504.08. The Standard & Poor’s 500 Index rose 26.83 points, or 3.04 per cent, to 909.71. The Nasdaq Composite Index advanced 52.22 points, or 3.11 per cent, to 1,732.36.
The S&P 500 recently climbed from a 12-year closing low on 9 March, rising 37.4 per cent through the close on 8 May. But after the benchmark index gave up some ground last week amid concerns about the economy and a flurry of secondary stock offerings, the S&P 500 was up 34.5 per cent from that low at yesterday’s close.
The S&P also moved back above 900, which some investors see as a key psychological level. The S&P closed above 900 in early May for the first time since the start of the year, but fell back into the 800s last week.
The Chicago Board Options Exchange Volatility Index (VIX) Wall Street’s favourite barometer of investor fear, fell 8.7 per cent to settle just above 30, a key psychological level. At 30.24, the VIX closed at its lowest level in more than eight months.
The Dow Jones US home construction index jumped 7.4 per cent, helped by Citigroup’s upgrade of Lennar shares to “buy” while an S&P index of retailers’ shares climbed 4.5 per cent. Lennar’s stock surged 13.7 per cent to $10.02.