The Financial Select Sector SPDR Fund (XLF) advanced 3.4 percent after the Federal Reserve and five central banks lowered interest rates on dollar swaps and China cut banks’ reserve requirements. Wells Fargo (WFC) & Co. and Bank of America Corp. (BAC) increased at least 3.1 percent. Alcoa Inc., Halliburton Co. and Caterpillar Inc. (CAT) rallied more than 4.5 percent to pace gains among companies that are most-dependent on economic growth.
The Standard & Poor’s 500 Index gained 2.7 percent to 1,227.76 at 9:39 a.m. New York time. The benchmark gauge rallied 3.2 percent in three days. The Dow Jones Industrial Average rose 321.13 points, or 2.8 percent, to 11,876.76 today.
“Central banks around the world are going back to easing or supporting the marketplace,” Mark Bronzo, who helps manage $24 billion at Security Global Investors in Irvington, New York, said in a telephone interview. “It’s a step in the right direction especially because it’s coordinated. These actions may help global growth not to follow Europe into a recession.”
Global stocks rebounded after China cut the amount of cash that banks must set aside as reserves for the first time since 2008. Equity-futures rallied further as the Fed and five other central banks agreed to reduce the interest rate on dollar liquidity swap lines by 50 basis points and extend their authorization through Feb. 1, 2013. In the U.S., American companies added more workers than anticipated in November, according to a private report based on payrolls.
Benchmark gauges rose for a second day yesterday as consumer confidence increased and European finance ministers discussed efforts to tame the debt crisis. Stock-futures slumped after the close of regular trading after S&P cut credit ratings for lenders including Bank of America and Citigroup Inc. (C)
Financial shares in the S&P 500 had the biggest decline (SPXL1) among 10 industries in November through yesterday, slumping 11 percent. The benchmark measure dropped 4.6 percent during the same period amid concern about Europe’s debt crisis.
Some of the largest lenders rebounded today after yesterday’s slump in a gauge of financial stocks in the S&P 500. Wells Fargo advanced 3.1 percent to $24.82. Bank of America gained 4.1 percent to $5.28. Citigroup rose 5.4 percent to $26.60. Goldman Sachs Group Inc. (GS) increased 3.4 percent to $91.81. JPMorgan Chase & Co. (JPM) added 4.7 percent to $29.89.
Alcoa, the largest U.S. aluminum producer, gained 4.5 percent to $9.73. Halliburton added 6.7 percent to $35.80. Caterpillar advanced 5.4 percent to $95.39.
American Airlines parent AMR Corp. (AMR) increased 58 percent to 41 cents. The shares tumbled 84 percent yesterday after the company announced a bankruptcy filing.
Gold mining stocks are trading at the cheapest level in at least nine years even as the industry’s profits are estimated to almost double this year and bullion trades close to its historic high. The benchmark NYSE Arca Gold BUGS Index (HUI) that includes Barrick Gold Corp., Newmont Mining Corp. and AngloGold Ashanti Ltd. ended last week at 17 times earnings, the lowest since at least November 2002 and below a five-year average of 37 times.
Investors sold equities across the board as Europe’s debt crisis soured the corporate profit outlook, and they’re ignoring analyst projections for bullion and gold producers. The gold index’s 16 members will increase combined per-share earnings 94 percent this year, according to estimates compiled by Bloomberg.
Gold equities have fallen 4.7 percent this year, heading for the first annual decline since 2008. Gold reached a record $1,921.15 on Sept. 6 and is set for an 11th annual gain.
“When you look back in history, you will say this was a buying opportunity,” said John Wong, a portfolio manager at CQS Group’s New City Investment Managers in London and lead manager of the $200 million Golden Prospect Precious Metals Ltd., a fund holding gold and silver stocks. “It’s like a coiled spring.”