US stocks have best day of 2014
Published 07/02/2014 | 01:17
After a rocky start to the week, US stocks roared back yesterday, giving major indexes their biggest gain of the year.
The Dow Jones industrial average and the S&P 500 index each closed up 1.2%, their largest single-day increase since December 18.
The rally helped the market rebound a day after a modest loss and continued a gradual comeback since a plunge of more than 2% on Monday.
"The market was very oversold going into the day's trading," said Jim Russell, senior equity strategist at US Bank Wealth Management.
The Dow Jones industrial average jumped 188.30 points, or 1.2%, to close at 15,628.53. The Standard & Poor's 500 index rose 21.79 points, also 1.2%, to 1,773.43. Both indexes were still down about half a percent for the week following a steep drop on Monday.
The Nasdaq composite gained 45 points, or 1.1%, to 4,057.12.
Yesterday's surge began overseas, where the European Central Bank decided not to cut interest rates. The move propelled major European stock indexes sharply higher.
Then the markets got a dose of good news on the US job market. The Labour Department reported that fewer people applied for unemployment benefits last week.
That report, combined with a private survey on US hiring released on Wednesday, appeared to bolster investors' confidence that the government will issue a positive January jobs report today.
"Those two numbers combined ... suggest that perhaps tomorrow's numbers might look a little stronger," Mr Russell said.
All week, investors have been looking ahead to the employment survey and what it will mean for the economy.
Evidence of healthy US job growth would suggest that the world's biggest economy is still expanding at a solid pace. That would comfort investors, many of whom became uneasy in recent weeks after signs of weaker global growth emerged.
Those concerns were seen by some other investors as a buying opportunity.
"The fear in the markets has subsided some," said Marc Doss, regional chief investment officer at Wells Fargo Private Bank.
Yesterday's gains were broad. All 10 of the S&P 500's sectors rose. Three stocks rose for every one that fell.
Stock buyers got going early on, reacting to better-than-expected earnings late on Wednesday from Walt Disney. The media giant got a lift from its movie hit Frozen and sales of the Disney Infinity video game. The stock rose 3.80 dollars, or 5.3%, to 75.56 dollars.
Akamai Technologies led the gainers in the S&P 500 index after the online content delivery company allayed fears that it had lost Apple as a customer.
Akamai soared 9.76 dollars, or 20.6%, to 57.18 dollars. Among the other big risers were construction industry supplier Vulcan Materials, which added 5.47 dollars, or 9.1%, to 65.66 dollars, and O'Reilly Automotive, which rose 12.16 dollars, or 9%, to 146.72 dollars.
Other stocks did not fare as well.
Twitter's first earnings report since becoming a public company stirred concerns that growth is slowing at the online messaging service. The stock lost 15.94 dollars, or 24.2%, to 50.03 dollars.
A couple of energy companies were among the biggest decliners in the S&P 500.
Chesapeake Energy skidded after the oil and gas company gave its outlook for production and spending in 2014. The company lost 1.80 dollars, or 6.9%, to 24.41 dollars. Petroleum refiner Tesoro shed 2.35 dollars, or 4.7%, to 47.60 dollars.
Investors had moved money into bonds in recent weeks on concern that U.S. growth is slowing. That trend continued to do a gradual reversal yesterday.
All told, major indexes gained a little bit of the ground lost since Monday, when the Dow sank 326 points as disappointing news about US manufacturing unnerved investors.
How Wall Street interprets today's employment report will determine whether the market will continue rebounding from Monday's losses.
In December, the economy added a disappointing 74,000 jobs. That was the fewest in three years and far below the average of 214,000 added in the previous four months.
The Labour Department said yesterday that the number of people applying for US unemployment benefits declined 20,000 last week to 331,000. That suggests Americans are facing fewer lay-offs and better job prospects.
"We do think that a little bit of a pause in the market was absolutely due and at hand as we finished 2013, so we think much of that has occurred," said Mr Russell.
"If tomorrow's numbers come in weak, you can blame the weather. If they come in a little stronger, of course that's what we want."