While you were sleeping: Stocks up, Obama plans budget cuts

While you were sleeping: Stocks rise, Obama plans budget cuts

(BusinessDesk) April 14 - Equities on Wall Street and in Europe advanced as the Federal Reserve said the U.S. economy grew at a moderate pace in the past two months, underpinning optimism President Barack Obama’s planned budget cuts won’t curb corporate profits.

In early afternoon trading on Wall Street, the Dow Jones Industrial Average rose 0.11%, the Standard & Poor’s 500 Index advanced 0.10% and the Nasdaq Composite Index gained 0.57%.

JPMorgan, the second-largest U.S. bank by assets, surpassed analysts’ estimates with its first-quarter profit, which jumped 67% to a record. Even so, the stock fell 1%, giving up earlier gains.

"People are getting the sense that no matter what these companies say, the easy money has already been made, so it will be tough to see further upward movement," Rick Fier, vice president at Conifer Securities in New York, told Reuters.

Among the gainers were Riverbed Technology Inc which raised its quarterly outlook. That also helped rival F5 Networks Inc.

The Fed said today in its Beige Book report in Washington that the economy expanded at a “moderate” pace across much of the U.S. in February and March, led by manufacturing. While higher commodity costs compelled sellers to try to boost prices, pressures to lift wages were “weak or subdued.”

“While many districts described the improvements as only moderate, most districts stated that gains were widespread across sectors,” the Fed said.

Meanwhile, Obama today set a goal of slashing the U.S. budget deficit by US$4 trillion by lowering spending and boosting taxes.

Those plans underpinned U.S. Treasuries, which advanced as the U.S. sold US$21 billion of 10-year notes.

The yield on the benchmark 10-year note declined two basis points to 3.47% at 1.40pm in New York, according to BGCantor Market Data.

Leading U.S. fund managers are allocating a larger chunk of their money for stocks in developing countries as growth forecasts for rich economies decline, according to Reuters.

Emerging equity funds drew record inflows of almost US$4 billion in the past week, and a new batch of funds dedicated to the asset class is hitting the market.

"Investors are chasing performance by reweighting in emerging markets," David Semple, who helps manage US$33 billion at Van Eck Global, told Reuters. "The equation is more balanced and tilted in favour of emerging markets."

In Europe, the Stoxx 600 Index ended the day 0.7% higher.

Oil was mixed, with U.S. crude for May delivery 34 cents lower at US$105.91 a barrel while Brent May crude was up 37 cents at US$121.30 in London.

In London, U.S. gasoline inventories dropped 7 million barrels last week, the biggest weekly decline since October 1998, to 209.7 million barrels, their lowest level since October 2010, data from the U.S. Energy Information Administration showed.

"The only thing constructive in the latest data was that gasoline supplies were down, but there is no supply problem with crude," Tom Knight, trader at Texarkana, Texas, told Reuters.

Metals consultancy GFMS issued a report saying gold's decade-long price rally could take the metal above US$1,600 an ounce by year-end. The company sees gold prices averaging US$1,455 an ounce this year and sticking to a range of US$1,319-1,620 an ounce, executive chairman Philip Klapwijk told delegates at the launch of its Gold Survey 2011.

Spot gold was bid at US$1,458.09 an ounce at 1416 GMT, against US$1,453.95 late in New York on Tuesday.

(BusinessDesk)

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