Stocks snap higher on hopes for new Fed action

  • By Pallavi Gogoi Associated Press
  • Tuesday, June 19, 2012 8:34pm
  • Business

NEW YORK — Stocks rose sharply on Wall Street Tuesday as traders turned their focus back to corporate news from the U.S. and hopes that the Federal Reserve will come up with a plan to jumpstart the economy. Banks and materials stocks led the market higher.

The Dow Jones industrial average soared 95.51 points to 12,837.33, its highest close in a month. Microsoft was one of the biggest gainers in the Dow. The stock jumped 3 percent after the company announced a new tablet computer called Surface to compete with the immensely popular iPad from Apple. Microsoft was up 86 cents at $30.70.

Stock traders are also latching on to recent signals from the Federal Reserve that the central bank may reveal plans to stimulate the economy at the end of its two-day meeting Wednesday.

“A good portion of today’s strong market action is from a hope factor that we’re going to get more easing from the Fed,” said Peter Cardillo, chief market economist at Rockwell Global Capital.

Economists say that even if the Fed does not act after its meeting, it will send a clear message that it is standing by to do so if needed.

Financial companies were among the best performing stocks as investors hoped for Fed action: Bank of America soared 4.5 percent, Citigroup gained 3.5 percent, JPMorgan Chase was up 2.2 percent and Morgan Stanley rose 3 percent.

Bank investors were also pleased to learn that a federal housing agency will clarify the process under which home lenders are forced to buy back soured home loans. The buybacks have cost banks billions of dollars. The uncertainty surrounding how much loans they will have to repurchase from the government has led them to reduce lending.

The agency’s statement comes just as the housing market is showing signs of healing. American builders broke new ground on more single-family homes in May and requested more permits to build homes and apartments than they have in the past three and a half years.

The Commerce Department also said April was much better for housing starts than first thought. The government revised the figures up to 744,000, the fastest building pace since October 2008.

Material stocks rose on the prospect of demand from home construction. US Steel rose over 9 percent and Freeport-McMoran Copper rose over 3 percent.

In other trading, the Standard &Poor’s 500 index rose 13.20 points to 1,357.98. Seven of the 10 industry groups in the S&P rose. The technology-heavy Nasdaq composite index rose 34.43 points to 2,929.76. The Dow Jones Utility average touched the highest level since August 2008 before closing slightly lower.

In Europe, borrowing costs eased for Spain: its benchmark 10-year bond yield fell below the key 7 percent level to 6.99 percent.

Spain raised $4.28 billion in an auction of 12- and 18-month bills, more than analysts had expected. However Spain’s cost to raise the money skyrocketed. The Spanish government had to pay an interest rate of 5.07 percent for the 12-month bills, up sharply from 2.98 percent at the last such auction on May 14.

Still, investors were heartened to see that people were willing to lend Spain money.

“Even though it cost Spain dearly and yields rose to a record, the fact is that it was not shut out of the markets,” said Cardillo.

Major European stock markets rose: Spain’s IBEX 35 index rose 2.7 percent. Germany’s DAX added 1.8 percent and France’s CAC-40 rose 1.7 percent.

The dollar and Treasury prices fell as traders moved money out of low-risk assets. The dollar fell about a penny against the euro to $1.27 and the yield on the 10-year Treasury note rose to 1.62 percent from 1.58 percent late Monday.

Among other stocks making big moves:

— Oracle soared 84 cents, or about 3 percent, to $27.96 after the software maker surprised investors with the early release of its fourth-quarter earnings. The results beat Wall Street’s forecasts, and the company said new software licenses increased sharply.

— J.C. Penney plunged $2.08, or 8.5 percent, to $22.25 after the chain store announced that Michael Francis, the former Target executive brought in to help redefine the company’s brand, was leaving the company. It was the biggest loss of any stock in the S&P 500.

— Barnes &Noble fell 61 cents, or 4 percent, to $14.63 after the book store chain reported a wider loss than Wall Street was expecting. It also reported that its Nook e-reader sales fell 11 percent in the quarter.

— Walgreen plunged $1.87, or 5.85 percent, to $30.09 after the company said it is buying a $6.7 billion stake in European health and beauty retailer Alliance Boots. Investors worried about a deal that would expose the biggest U.S. drugstore chain to a continent beset by worries of a recession.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.