US stocks continued to add to last weeks gains, as banks and resource shares prolonged their rally.
‘You’ve moved to a stage where investors accept that it’s a bull market and are worried that they’re missing it,’ said Hugh Johnson of Albany. ‘The underlying economic numbers confirm that it’s a bull market.’ [1]
Recovery hopes continued to drive metal prices higher today; the price of copper for three months delivery was up by 1.2% to $6,345.75 a metric ton on the London Metal Exchange and lead added 5.8% to $1,971, the highest level since 26 September. Nickel, lead and zinc also gained, helping fuel a rally across mining shares.
Freeport-McMoRan Copper & Gold climbed 2.4% to $66.61, Newmont Mining advanced 1.1% to $41.30 a share and Alcoa rose 1% to 12.69 within the first thirty minutes of trading today. Energy majors were also in vogue, as the price of October Light sweet crude edged 0.6% higher to $74.34 a barrel. Chevron and Exxon’s shares gained 1.2% to $70.61 and $70.75 respectively, while Schlumberger jumped 2.7% to $58.07.
‘Stronger worldwide demand for commodities is an indicator of the global economy’s health continuing to improve,’ said Michael James of Wedbush Morgan Securities. ‘The market continues to defy people’s expectations for any kind of pullback.’ [2]
US banks also garnered support, despite downbeat comments from banking analyst Richard Bove, who said that he foresaw another 150-200 bank failures during the present crisis. [3] At the beginning of this month, however, Mr Bove told Bloomberg News that he anticipates bank earnings will ’soar’ over the next few quarters.
There was a downbeat comment from Nouriel Roubini, the New York University professor who had predicted the credit crisis. Mr Roubini today told the Financial Times that he sees increased risks of a double-dip recession, as governments attempt to unwind economic stimulus packages.
Investors seemed to shrug off any sort of bad news however. Shares in Citigroup surged 4.5% to $4.91, Bank of America gained 2.6% to $17.91 and Wells Fargo gained 1.1% to $28.25.
Credit card companies were also trading higher this afternoon, after analysts at Barclays Capitals provided American Express, Capital One and Discover with ‘overweight’ ratings. [4] American Express advanced 1.8% to $33.44, Capital One added 2.5% to $37.41 and Discover Financial Services climbed 3.4% to $13.97.
In the meantime, insurer Hartford Financial Services jumped 6.2% to $21.83 after Deutsche Bank raised its price target by 25% to $25. [5]
Elsewhere, it has emerged that News Corp has appointed Goldman Sachs to advise the company over the potential sale of Dow Jones Indexes, which it purchased last year. News Corp gained 1.1% to $11.29.
Advanced Micro Devices was another star performer, up 10% to $4.07 after Citigroup raised its recommendation on the company’s shares from ‘hold’ to ‘buy’. Citigroup said the company’s competitive position and gross margin are likely to improve. [6]
By around 3.35pm (London time), the Dow Jones Industrial Average was 62.65 points (+0.66%) higher at 9568.61, while the broader S&P 500 was 8.22 points (+0.80%) above its previous close at 1034.35.
[1] Source: Bloomberg News (24 August 2009)
[2] Source: Bloomberg News (24 August 2009)
[3] Source: Bloomberg News (24 August 2009)
[4] Source: Financial Times (24 August 2009)
[5] Source: Bloomberg News (24 August 2009)
[6] Source: Bloomberg News (24 August 2009)
By Anthony Grech, Research Analyst, IG Index.
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