July 16, 2009 / 9:44 PM / 11 years ago

U.S. stocks stage late-day rally

NEW YORK (Reuters) - U.S. stocks staged a late-day rally on Thursday on renewed hopes that earnings will remain strong, while rebounding equities and news of surging growth in China, the No. 2 energy consumer, helped lift crude prices.

The turn in sentiment came before International Business Machines (IBM.N), the biggest contributor to the Dow’s rise, was set to report results after the closing bell.

Wall Street rallied, with the benchmark Standard & Poor’s 500 index posting the best four days since late March, when the S&P 500 recovered from a 12-year low set earlier in the month.

“Investors have ratcheted up expectations for earnings almost across the board, so that optimism is still there even if today’s action is rather muted,” said Paul Baiocchi, senior market strategist at Delta Global Advisors in San Francisco.

After the bell, IBM (IBM.N) posted better-than-expected quarterly results despite a sharp slide in revenue, while quarterly profits at Google Inc (GOOG.O) also were stronger than expected despite a tough advertising market.

The Dow Jones industrial average .DJI shot up 95.61 points, or 1.11 percent, to close at 8,711.82. The Standard & Poor's 500 Index .SPX advanced 8.06 points, or 0.86 percent, to 940.74. The Nasdaq Composite Index .IXIC rose 22.13 points, or 1.19 percent, to 1,885.03.

European shares hit a one-month closing high on improved sentiment following JPMorgan’s results and data that showed the number of U.S. workers claiming new jobless benefits fell last week to their lowest since January.

The seasonally adjusted government data was again distorted by earlier layoffs in the automotive industry.

The FTSEurofirst 300 .FTEU3 index of top European shares ended 0.4 percent higher at 866.81 points, its fourth straight daily gain.

Asian shares across the region outside of Japan rose 1.3 percent to their highest since mid-June, while Japan's benchmark Nikkei .N225 underperformed with a rise of 0.8 percent.

BONDS UP ON CIT SAFETY BID

Risk aversion had earlier swept markets, pushing up U.S. government debt prices and dampening commodity prices after mixed economic data and concern about the possible failure of U.S. lender CIT (CIT.N) spurred caution.

U.S. Treasuries’ prices rose, supported by some bargain hunting after a three-day sell-off, and by safe-haven buying, given the concern about the potential CIT failure.

The benchmark 10-year U.S. Treasury note was up 10/32 in price to yield 3.57 percent. The 2-year U.S. Treasury note was up 2/32 in price to yield 0.99 percent.

Worries about earnings reports on Friday from Citigroup (C.N) and Bank of America (BAC.N) also capped investor enthusiasm and contributed to volatility on Wall Street.

A fall in a reading of the Federal Reserve Bank of Philadelphia’s index of business conditions in the U.S. Mid-Atlantic region to minus 7.5 in July from minus 2.2 in June also helped push up bond prices.

“We are in a difficult position at the moment because we are caught on the cusp between is this a sense of sustainable recovery or a possibility of a relapse?” said Richard McGuire, fixed income strategist at RBC Capital Markets in London.

“There’s no real convincing evidence yet on either side,” he said.

DOLLAR DROPS, COMMODITIES MIXED

The U.S. dollar initially fell to a six-week low against major currencies after JPMorgan Chase & Co reported strong results, providing further evidence of recovery.

The dollar was down against a basket of major currencies, with the U.S. Dollar Index .DXY off 0.10 percent at 79.237.

The euro was up 0.30 percent at $1.4147, and against the yen, the dollar was down 0.50 percent at 93.79.

U.S. crude oil rose 48 cents to settle at $62.02 a barrel, while London Brent eased 34 cents to $62.75 a barrel ahead of the August contract’s expiry.

The gains, which added to Wednesday’s rally of more than $2 triggered by a U.S. report showing sliding domestic crude inventories, coincided with Wall Street’s afternoon bounce.

“Another late rally and coinciding with an S&P 500 rally, although it’s arguable who’s watching whom more closely,” said Tim Evans, oil analyst at Citi Futures Perspective in New York.

U.S. gold futures ended lower after trading in a tight range as bullion investors looked for a new catalyst from markets outside of the commodities sector to fuel the metal’s recent rally amid inflation concerns.

August futures fell $4 to settle at $935.40 an ounce in New York.

Copper ended down, giving back a fraction of the week’s strong gains, even though upbeat U.S. corporate earnings and China’s robust growth data provided fresh signs that the worst may be over for the world economy.

China reported economic growth rose to 7.9 percent in the second quarter, beating forecasts.

Copper for September delivery in New York slipped 0.25 cent to close at $2.3895 a pound.

Reporting by Rodrigo Campos, Ellen Freilich, Steven C. Johnson in New York; Atul Prakash, David Sheppard and Emelia Sithole-Matarise in London; Writing by Herbert Lash; Editing by Jan Paschal

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