While you were sleeping: Equities extend advance

While you were sleeping: Equities extend advance

(BusinessDesk) January 4 - Stocks on Wall Street and in Europe began 2011 with the same optimism investors displayed in the final weeks of December after another report highlighted the sustained pace of recovery in the world’s biggest economy.

The Dow Jones industrial average rose 1.05%, the S&P 500 index advanced 1.35% and the Nasdaq Composite Index gained 1.65% in early afternoon trading.

Across the Atlantic, the Stoxx Europe 600 Index advanced 0.8% to 278.02 at the 5.30pm close in Frankfurt. The U.K. and Ireland markets were closed today.

"We are starting the year off on the right note here. Everybody's back and suddenly everybody realises that the economy is pretty good," Stephen Massocca, managing director at Wedbush Morgan in San Francisco, told Reuters.

"There is a lot of money in cash, a lot of money in bonds that would like out of bonds, and it's only natural with the economic improvement it's finding its way to equities."

U.S. stocks finished 2010 on a high note. The S&P 500 posted its strongest December since 1991. For the year, the S&P advanced 12.8%, the Dow Jones industrial average gained 11%, and the Nasdaq rose 16.9%.

That optimism was underpinned today by data showing manufacturing in the U.S. expanded in December at the fastest pace in seven months.

The Institute for Supply Management’s index rose to 57 last month from 56.6 in November, the Tempe, Arizona-based group said.

As a result, U.S. Treasuries declined. U.S. 10-year note yields increased five basis points to 3.34% at midday in New York, according to BGCantor Market Data.

“The data came in line with expectations and continues the string of good news on the economy,” Kevin Flanagan, a Purchase, New York-based chief fixed-income strategist for Morgan Stanley Smith Barney, told Bloomberg News.

“The number confirms a trend that we’ve been seeing on the economic front. The employment report will be the linchpin for where we are going to go.”

The lastest U.S. jobs report is scheduled to be released on Friday - the same day that Fed chairman Ben Bernanke testifies to the Senate Budget Committee on monetary and fiscal policy.

Meanwhile, Bank of America Corp jumped more than 5% after resolving disputes with Freddie Mac and Fannie Mae by agreeing to pay more than US$2.6 billion to resolve a dispute about faulty mortgage loans.

The euro, which Estonia adopted on January 1 to become the 17th member of the currency region, weakened 6.5% against the greenback last year, its worst performance since 2005, amid the region’s sovereign-debt crisis.

In midday New York trading the euro was up 0.8% against sterling to 86.35 pence and 0.4% higher against the yen to 109.06 yen.

"Arguably, there's increased risk appetite with U.S. stocks up. I think that is having a positive impact on the euro, which can be positively correlated with equities," Nick Bennenbroek, head of FX strategy at Wells Fargo in New York, told Reuters.

Oil climbed to a 27-month high, copper hit a record US$4.498 a pound while silver topped US$31 an ounce.

U.S. crude oil futures continued the rally that started at the end of 2010, which left prices 15% higher on the year.

Today, U.S. crude oil for February delivery gained 0.89% to US$92.19 a barrel by noon EST.

(BusinessDesk)

© Scoop Media