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Wall Street extends rally as economic hopes rise

April 03, 2009|Walter Hamilton

NEW YORK — A little good news is going a long way in the stock market.

Share prices powered ahead again Thursday, with the Dow Jones industrial average climbing more than 200 points, or almost 3%, on the latest whiff of optimism that the economy is stabilizing after the longest recession since the Great Depression.

The market extended its nearly four-week-long advance after regulators eased bank-accounting rules and leaders of the Group of 20 nations in London said they would allocate more than $1 trillion to boost the world economy, mostly via loans from the International Monetary Fund to struggling poorer countries.

Investors also were buoyed by a 1.8% increase in U.S. factory orders in February, the first increase in seven months. Analysts had been expecting a decline. The report was the latest in a string of inconclusive but hope-provoking indications that the worst may be over for the domestic economy.

"Any glimmer of good news at this point will start catching people's attention," said Robert W. Bissell, president of Wells Capital Management.

Further encouragement came after the market closed, when BlackBerry maker Research in Motion Ltd. forecast better-than-expected earnings for the three months that began March 1. The Waterloo, Canada, company's shares surged 23% in after-hours trading.

That stirred hope that first-quarter earnings reports due in the next few weeks will offer some signs that companies are holding up despite the economic turmoil.

"The market has discounted virtual financial Armageddon," said Bill Buechler, president of Buechler Capital Asset Management in La Jolla. "All these little signs that maybe that's not the case all add up to being a very positive indicator that we may have turned the corner in the market."

Although Buechler does think the corner has been turned, "I'm afraid to say it," he joked, for fear of jinxing the rally.

The Dow advanced 216.48 points, or 2.8%, to 7,978.08. The blue-chip indicator bolted more than 300 points to rise above 8,000 for the first time since Feb. 10, before falling back as the rally lost steam late in the day.

The Standard & Poor's 500 index rose 23.30 points, or 2.9%, to 834.38, and the Nasdaq composite advanced 51.03, or 3.3%, to 1,602.63.

Since hitting multiyear lows on March 9, the Dow is up 22%, the S&P is up 23% and the Nasdaq is up 26%.

Enthusiasm about prospects for an economic recovery sent shares of industrial companies in the S&P 500 surging 5.5%, while firms that sell so-called discretionary consumer goods jumped 5.2%. And the Dow average of transportation stocks, a big beneficiary of economic growth, shot up 7.9%.

The S&P's financial-stock index climbed 2.9% after a U.S. accounting panel softened rules that have forced banks to take tens of billions of dollars in losses on mortgage-backed securities and other troubled assets. The lightening of "mark to market" standards by the Financial Accounting Standards Board could allow banks to report fewer losses stemming from the troubled economy.

"It's potentially very powerful," Buechler said. "It's going to allow financial institutions to use more common sense in their valuation of assets, as opposed to being forced to mark their holdings to the latest stress sale. A little common sense will go a long way at the moment."

Investors appeared to disregard a jump in first-time U.S. unemployment claims to a 26-year high.

The Labor Department today will release its report on the March job market. Analysts estimate that payrolls shrank by 660,000 jobs from February's level, with unemployment surging to 8.5% from 8.1%.

A worse-than-expected number of jobs lost last month could jolt the stock market, but investors recently haven't been fazed by the job reports, perhaps because the labor market tends to recover months after economic output and corporate earnings rebound.

Thursday's rally began in Asia, where key stock indexes surged 7.4% in Hong Kong and 4.4% in Japan after a report from China showed that the country's manufacturing sector expanded in March for the first time in six months.

A wave of optimism unleashed by the G-20 meeting then washed over European markets. Germany's DAX stock index soared 6.1%, its biggest one-day advance since the latest market rally began March 6. Britain's FTSE-100 jumped 4.3%.

European stocks rose even though the European Central Bank cut its key short-term interest rate less than expected, shaving it to 1.25% from 1.50%.


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