Archive for September, 2009

Recovery bets lift Wall Street (Reuters)

Tuesday, September 22nd, 2009 | Finance News

NEW YORK (Reuters) –
Stocks rose on Tuesday, as investors bet the U.S. Federal Reserve will stick to its accommodative policy to foster economic recovery, boosting growth-sensitive sectors such as financials, technology and industrials.

The gains were broad-based, with all but three of the 10 S&P 500 industry sectors ending higher. Energy and other natural resources stocks were underpinned by resurgent global commodity prices as the U.S. dollar retreated.

The Federal Reserve began a two-day policy-setting meeting on Tuesday. Its policy statement is due on Wednesday around 2:15 p.m. EDT.

With no change expected in interest rates, investors probably will focus on the bank's assessment of the economic outlook, particularly after Chairman Ben Bernanke said last week that the recession was "technically" over.

"Bernanke's research will have him staying the course here, in an accommodative fashion for a bit longer, and I think the market very much believes that and is trading off of that," said Dean Curnutt, president of Macro Risk Advisors, an equity derivatives strategy and execution brokerage, in New York.

"Ultimately, the extent to which the Fed is accommodating this market needs to be unwound, and we'll see if we hear more on that tomorrow. Our sense is that there will not be a tremendous amount" of information on that topic.

The Dow Jones industrial average (.DJI) gained 51.01 points, or 0.52 percent, to end at 9,829.87. The Standard & Poor's 500 Index (.SPX) rose 7.00 points, or 0.66 percent, to 1,071.66 -- a fresh 11-month closing high. The Nasdaq Composite Index (.IXIC) climbed 8.26 points, or 0.39 percent, to 2,146.30.

The S&P 500 has risen 58.4 percent since hitting a 12-year closing low on March 9.

CITIGROUP CLIMBS, AIG SLIDES

Among financials, Citigroup (C.N) shares jumped 5 percent to $4.65 following news that Singapore wealth fund GIC has cut its stake in the U.S. banking company in half.

Bank of America (BAC.N) rose 2.1 percent to $17.61 after Rochdale Securities analyst Richard Bove raised his price target on the stock, citing the bank's strengthened financial condition.

The S&P 500 financial index (.GSPF) was up 2.3 percent.

But insurer American International Group (AIG.N) bucked the positive trend, falling 5.4 percent to $45.80 amid speculation it was planning to sell shares in a secondary offering. The stock had climbed as much as 12.4 percent to an intraday high of $54.39 before a late-afternoon reversal.

On the technology front, Google Inc (GOOG.O) was a particular standout, hitting an intraday high of $501.99 -- its highest level since August 2008. Google's stock ended up 0.4 percent at $499.06 on Nasdaq.

On Tuesday morning, Canaccord Adams technology analyst Jeff Rath raised his price target on Google's stock to $560 from $480, saying, "Our recent checks suggest that ad budgets are coming back, particularly in e-commerce." He rates the stock a "buy."

Carnival Corp & Plc (CCL.N)(CCL.L) lifted its 2009 earnings forecast and said ticket prices for its cruises were stabilizing, sending the shares of the world's largest cruise operator up 4.8 percent to $33.52.

Among industrials, Caterpillar Inc (CAT.N) shot up 3.6 percent to $54.34.

Among commodity plays, Newmont Mining (NEM.N) added 1.8 percent to $45.22, and Alcoa Inc (AA.N) rose 2.3 percent to $14.26. Signs that the U.S. Treasury's $43 billion auction of new two-year notes met strong demand added to the positive tone.

Investors have scrutinized auction results closely this year, especially after worries surfaced back in May about the longevity of the United States' prized AAA credit rating.

The U.S. dollar's slide to a one-year low against the euro helped propel global commodity prices higher, with U.S. front-month crude up 2.6 percent, or $1.84, to settle at $71.55 a barrel, while spot gold rose toward an 18-month high approaching $1,020 an ounce.

Volume was moderate, with about 1.27 billion shares changing hands on the New York Stock Exchange, compared with last year's estimated daily average of 1.49 billion. On the Nasdaq, about 2.51 billion shares traded, above last year's daily average of 2.28 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 5 to 2, while on the Nasdaq, about five stocks rose for every four that fell.

(Editing by Jan Paschal)

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U.S. won’t list systemically key firms: Geithner (Reuters)

Tuesday, September 22nd, 2009 | Finance News

WASHINGTON (Reuters) –
Treasury Secretary Timothy Geithner said in testimony prepared for delivery on Wednesday that the United States would not identify in advance financial firms that it views as systemically important.

"Crucially under our proposals, there will be no fixed list of Tier 1 FHCs (financial holding companies), and identification of a firm as a Tier 1 FHC will not convey a government subsidy," Geithner said in remarks to the House of Representatives' Financial Services Committee, which were posted on its website on Tuesday.

(Reporting by Alister Bull; Editing by Leslie Adler)

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Fed starts meeting, seen noting improving economy (Reuters)

Tuesday, September 22nd, 2009 | Finance News

WASHINGTON (Reuters) –
The Federal Reserve opened a two-day meeting on Tuesday that was expected to end with a recognition the U.S. economy is on the mend, but no hint of an imminent monetary policy shift.

The Fed's policy-setting Federal Open Market Committee began conferring at around 2 p.m. EDT, a spokesperson said. The central bank is expected to issue a statement about policy and the economic outlook at around 2:15 p.m. EDT on Wednesday.

The Fed seems certain to hold benchmark interest rates near zero, and most economists do not see it raising them until the middle of next year at the earliest.

Policy-makers, however, are widely expected to discuss ways to pull back their massive provisions of cash to the economy in a way that preserves the recovery, while preventing inflation.

A key question that will be on the table is how soon and how rapidly the Fed should conclude its planned purchases of mortgage-related securities. It has said it will buy up to $1.25 trillion of mortgage-backed securities and $200 billion of housing agency debt by the end of the year.

After pressing interest rates close to zero in December, the Fed turned to asset purchases as a way to drive down mortgage costs and support the economy.

Most analysts expect the Fed to stretch its purchases of mortgage-related securities into the beginning of next year to allow a tapering off that is less disruptive to markets.

The Fed already has announced it would taper off purchases in a separate program to buy up to $300 billion in longer-term U.S. Treasury securities by the middle of next month.

"It is hard to rule out a somewhat slower-than-earlier envisioned pace at which the Fed meets its plans for mortgage-linked securities purchases," UBS Securities economist Maury Harris wrote in a research note.

While some Fed watchers think an announcement on the program's future could come on Wednesday, others think the central bank's next policy meeting in early November marks a more natural decision point.

FED HAWKS SPREAD THEIR WINGS

The future of the program is less clear cut than that of the Treasuries purchase plan, which many analysts believed was ineffective at lowering borrowing costs and which raised worries the central bank was printing money to finance a surge in U.S. government spending.

Two voting members of the FOMC have said curtailing the mortgage securities buying program should be on the table in light of the improving economy. Richmond Federal Reserve Bank President Jeffrey Lacker, a noted anti-inflation hawk, questioned whether the economy needs the additional stimulus.

At the other extreme of the debate is San Francisco Fed President Janet Yellen, who said high unemployment and falling price indicators meant the central bank should worry about the risk of a damaging deflationary cycle rather than inflation.

Fed Chairman Ben Bernanke said recently that while the recession appears to be over, the recovery will be sluggish, suggesting Fed will move cautiously in unwinding its programs to boost the economy.

"Slack in the labor markets and diminished consumer demand should keep a lid on any near-term inflation pressures," Moody's Economy.com economist Joseph Brusuelas wrote in research note.

(Reporting by Mark Felsenthal; Editing by Andrea Ricci)

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