Better-than-expected profits from Citigroup and Bank of America lifted Wall Street on Monday as investors grew more optimistic about a strong economic rebound. A late-day sell-off, however, limited the gains.
The Dow Jones industrial average rose as much as 158 points before losing momentum in the final hour of trading. Analysts said it was unclear if reports of a trading error at the Chicago Mercantile Exchange were behind the drop or if, instead, investors opted to turn cautious after the large runup.
"The rally began March 11, and we're now entering the fifth month. On top of that, we had a 160-point move -- so it was up, up and away," said Larry Wachtel, analyst at Wachovia Securities. "There might have been an aspect of too much, too soon."
The Dow closed up 57.56 points, or 0.6%, at 9,177.15. The technology-laden Nasdaq composite index gained 20.89 points, or 1.2%, to 1,754.82. The Standard & Poor's 500 index rose 5.72 points, or 0.6%, to 1,003.86.
Winners led losers by 3 to 2 on the New York Stock Exchange and by almost 2 to 1 on Nasdaq. Trading was active.
Dow component Citigroup advanced 97 cents to $47.12 after the nation's largest financial institution reported second-quarter earnings that beat estimates by 3 cents a share. The bank also raised its quarterly dividend to 35 cents from 20 cents.
Bank of America rose 58 cents to $83.46 after it also posted quarterly profit that topped expectations.
Intel, another Dow member, gained 68 cents to $24.02 after Merrill Lynch raised the technology company's stock rating to "buy" from "neutral." The company releases its quarterly earnings report today.
But shares lost some of their early gains after an apparent error in electronic trading in stock index futures. The Chicago Mercantile Exchange was forced to unwind certain trades, and rumors about the error also affected the market, analysts said.
While stocks have surged in recent months, investors have been watching the second-quarter earnings season for evidence that the economic recovery is firmly underway. Analysts say companies will largely meet, if not beat, expectations, creating more opportunities for stock gains.
"We're getting some indications that the rally was actually based on something fundamental" rather than investors' expectations, said Ed Peters, chief investment officer at PanAgora Asset Management Inc. in Boston. "With all this news coming together, it's mostly good."
