Copyright 2010 Marketwatch
Distributed by McClatchy-Tribune News Service
January 13, 2010 Wednesday
SECTION: BUSINESS AND FINANCIAL NEWS
LENGTH: 589 words
HEADLINE: Stocks rise as health care, financials surge
BYLINE: By Donna Kardos Yesalavich and Kristina Peterson, MarketWatch
DATELINE: NEW YORK
NEW YORK _ Stocks enjoyed a broad rally Wednesday as an analyst upgrade of Merck spurred the health-care sector higher, while financials benefited from hopes for high profits.
The Dow Jones Industrial Average closed up 53.51 points, or 0.5 percent, to end at 10,680.77, led by a 3.7 percent gain in Merck. Credit Suisse raised its investment rating on the drugmaker to outperform from neutral and boosted its target price on the stock, saying it has a positive view on the company’s pipeline.
“That really got all the drug stocks going,” including a 2.3 percent gain in Merck’s rival and fellow Dow component Pfizer, said Todd Leone, head of listed trading, Cowen & Co.
But he added: “It’s generally been quiet. A lot of people are waiting to see how earnings season goes before they decide what to do the rest of the year.”
Composite volume in New York Stock Exchange-listed companies recently totaled 4.3 billion shares, the lowest since the first trading session of the year.
The S&P 500 was up 0.8 percent, led by gains of more than 1 percent each in financials and health care. Telecommunications was the only category in the broad index trading lower, off 0.4 percent.
Investors paid close attention to testimony from the chief executives of Bank of America, JPMorgan Chase and Goldman Sachs, along with Morgan Stanley’s chairman, before a special federal commission investigating the causes of the recent U.S. financial crisis.
All four banks closed higher. Bank of America and JPMorgan Chase ended up almost 2 percent each, while Morgan Stanley was up 0.4 percent and Goldman Sachs gained 0.7 percent.
At the hearing, the executives acknowledged their missteps leading up to the financial crisis, aware of the public frustration over Wall Street profits and reports of sizable year-end bonuses to be paid to executives. However, the bankers were also quick to warn of any overreaction from policy makers that could hurt their businesses and the broader economy. Read more about their testimony
Many participants are looking ahead to a strong earnings season from the banks, beginning with JPMorgan Chase’s report due Friday.
“In the long run, I think these banks will be OK as long as (the Federal Reserve) keeps interest rates at zero,” said trader Alan Valdes, of Kabrik Trading, a New York brokerage. “They’re not lending the money they borrow at zero out; they’re putting it into risk trades in commodities and everything else.”
The Nasdaq Composite Index climbed 1.1 percent, helped by a 1.7 percent gain in Intel ahead of the chip maker’s earnings report due after Thursday’s close. However, the Nasdaq’s gains were limited by a 0.6 percent decline in component Google after the Internet giant threatened to pull out of China, complaining of online security breaches targeting human-rights protesters.
The possibility of Google exiting China was good news at least for Baidu, its chief competitor in China. American depository shares of the Chinese search engine rose more than 13 percent recently.
In economic news, the Federal Reserve’s beige book of regional economic indicators suggested modest improvement in the U.S. economy, though activity remains low in historic terms.
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