State Street profit upgrade lifts stocks
US stocks logged their best one-day gain in about six weeks yesterday after a bullish forecast from financial company State Street fuelled optimism about the coming earnings season and helped the S&P 500 break above a major resistance level.
State Street shares closed 9.9 percent higher at $36.63 after the asset manager and custody firm said quarterly earnings would far exceed expectations, providing a lifeline to investors after several weeks of dismal economic reports.
Bank stocks led the way, but investors also scooped up industrial and technology shares.
“There is some confidence now that there will be more positive surprises than negative during the earnings season,” said Marc Pado, US market strategist at Cantor Fitzgerald & Co in San Francisco.
The Dow Jones industrial average rose 274.66 points, or 2.82 per cent, to 10,018.28. The Standard & Poor’s 500 Index gained 32.21 points, or 3.13 per cent, to 1,060.27.
The Nasdaq Composite Index advanced 65.59 points, or 3.13 per cent, to 2,159.47.
It was the indexes’ biggest percentage advance since 27 May.
The KBW bank index climbed 5.6 per cent, while State Street rivals Northern Trust rose 6.9 per cent to $49.14 and Bank of New York Mellon was up 6.4 per cent to $26.32.
European banks also rallied on optimism most would pass the European banking stress tests, giving a boost to the wider market.
When the benchmark S&P 500 index broke through 1,040, it fuelled more buying by those who had put on short positions. The 1,040 level was viewed as a resistance level to further gains, according to Todd Salamone, vice president of research at Schaeffer’s Investment Research.
“That creates a very crowded position that is very vulnerable to an unwind, and I think we’re seeing that today,” he said.
The S&P 500 closed around 1,060, the next resistance level that could prevent the index from rising further today.
The index has reached the 23.6 per cent retracement of the move from its 2010 high in April to its year low hit last week.