Dow surges more than 200 points, gold holds TSX back
New York (Oct 30) U.S. stocks rallied as data showed faster-than-estimated economic growth, fueling speculation the economy is strong enough to withstand higher interest rates.
Visa Inc. and MasterCard Inc. added more than 8 percent each as the two largest U.S. payment networks reported results that topped estimates. Bristol-Myers Squibb Co jumped 7.7 percent after a drug improved survival rates for cancer patients. Energy shares retreated as oil resumed a selloff after U.S. production rose to the highest level since the 1980s.
After six years of quantitative easing from the Fed Breakingviews' Andy Mukherjee says despite a growth spike in 2010 a massive expansion in credit left emerging markets strapped with debt.
The Standard & Poor’s 500 Index rose 0.7 percent to a one-month high of 1,996.34 at 1:44 p.m. in New York after earlier losing as much as 0.4 percent. The Dow Jones Industrial Average rallied 213.05 points, or 1.3 percent, to 17,187.36. Visa is the Dow’s largest member by weighting. The Russell 2000 Index and the Nasdaq Composite Index rose at least 0.4 percent.
In Canada, the S&P/TSX composite index was virtually unchanged. It earlier was in negative territory, weighed down by sinking gold shares. The price of bullion today is down almost 2 per cent, under pressure from a stronger U.S. dollar.
“The Fed is affecting the mood,” said Patrick Spencer, head of U.S. equity sales at Robert W. Baird & Co. in London. “They’re basically saying everything is on track for the best case in the economy, but maybe the first interest-rate hike will get closer, and that might worry people.”
NYSE Euronext said in an email alert that the securities information processor, the computers that dissimenate stock prices, is “experiencing issues publishing and receiving trades and quotes.”
The S&P 500 lost 0.1 percent yesterday after the Fed ended its quantitative easing program, indicating the U.S. economy is on a stable growth path. Officials said labor market conditions “improved somewhat further,” and that a range of indicators suggests that “underutilization of labor resources is gradually diminishing,” modifying earlier language that referred to “significant underutilization.”
The central bank reiterated its commitment to keep interest rates low for a considerable time until inflation increases toward its goal.
Data today showed fewer Americans filed applications for unemployment benefits over the past month than at any time in more than 14 years, a sign the strengthening U.S. economy is buoying the labor market.
A separate report indicated the economy in the U.S. expanded more than forecast in the third quarter, capping its strongest six months in more than a decade, as gains in government spending and a shrinking trade deficit made up for a slowdown in household purchases.
“The GDP number’s fine, not spectacular,” Michael Block, chief equity strategist at Rhino Trading Partners LLC in New York, said by phone. “The inflation data isn’t great and the quality of the GDP beat isn’t great as a lot of it is from government and defense spending. It adds to dovishness.”
Concerns that Europe will slip into a recession just as Fed bond buying ends sent the S&P 500 down 7.4 percent from an all- time high of 2,011.36 in mid-September through Oct. 15.
The index has rallied to within 1 percent of its record on speculation the Fed would remain accommodative even as the U.S. economy picked up steam.
Visa rallied 9.3 percent to $234.71. The world’s largest payments network reported fiscal fourth-quarter profit that beat analysts’ estimates as customer spending abroad improved. The company also said it planned to charge some U.S. banks higher card-processing fees.
MasterCard climbed 8.2 percent to $82.25. The second- largest U.S. payments network posted third-quarter profit that beat analysts’ estimates as customer spending climbed. Net income increased 15 percent to $1.02 billion, or 87 cents a share, from $879 million, or 73 cents, a year earlier.