Tuesday, Jun 19, 2012

--Stocks rise on hope for more Fed stimulus

--S&P 500, Nasdaq extend gains to a fourth session

--Housing starts slow in May; permits jump to highest since 2008

(Updates throughout with closing prices)

 

   By Chris Dieterich 

 

NEW YORK--Speculation that U.S. central bankers are set to unveil additional stimulus measures and the easing of tensions across Europe's financial markets lifted the S&P 500 to its the fourth gain in a row.

The Standard & Poor's 500-stock index rose 13.20 points, or 1%, to 1357.98 on Tuesday, its highest close in nearly five weeks.

The Dow Jones Industrial Average tacked on 95.51 points, or 0.8%, to 12837.33, closing just short of its fourth triple-digit gain in six sessions.

Materials stocks led Tuesday's rally, with United States Steel surging $1.74, or 9.5%, to $20.15. Financials followed closely behind after federal housing regulators said they were revising guidelines that could reduce lenders' risks of having to buy back soured mortgages.

Bank of America jumped 35 cents, or 4.5%, to 8.11, to lead the Dow's advance.

Microsoft, also a Dow component, jumped 86 cents, or 2.9%, to 30.70, after the software company unveiled its Surface tablet computer, which will compete with Apple's iPad. Apple's stock rose 1.63, or 0.3%, to 587.41.

The Nasdaq Composite rose 34.43 points, or 1.2%, to 2929.76. The technology-heavy index rose for the fourth session in a row, its longest streak of gains since February.

The Federal Reserve's policy-setting committee convened a two-day meeting on Tuesday. A series of statements and forecasts are scheduled to begin around midday Wednesday.

Tuesday's stock rally was based "generally on enthusiasm for, and hope that, the Fed might say something market-friendly tomorrow," said Steve Sosnick, equity risk manager for Timber Hill, the market-making unit of Interactive Brokers.

Investors will be watching closely for hints that the central bank is preparing again to stimulate the U.S. economy, perhaps through additional purchases of government securities, or a variation of an existing program set up to extend maturities of the central bank's bond holdings.

"Markets will be disappointed if they do nothing," said Paul Simon, chief investment officer at Tactical Allocation Group in Birmingham, Mich.

In U.S. economic news, home building slowed in May but new permits reached their highest level since 2008, suggesting future demand for new houses.

In Europe, markets jumped as Spain's borrowing costs eased off all-time highs. The Stoxx Europe 600 gained 1.6%, its biggest single-session gain in two weeks, to advance for the third session in a row.

Worries lingered, however, as Spain paid considerably more in interest rates to lure investors to 12-month and 18-month debt issues than it did a month ago.

Traders shrugged off a dour reading from Germany, where economic expectations in June fell at the fastest rate in more than a decade.

Asian markets mostly fell. Japan's Nikkei Stock Average lost 0.8%, and China's Shanghai Composite gave up 0.7%. Both benchmarks lost ground of the first time in three sessions.

Crude oil futures rose 0.9% to settle at $84.03 a barrel, while gold futures fell 0.2% to settle at $1622.20 a troy ounce. The U.S. dollar slipped against the euro and the yen. The yield on the benchmark 10-year Treasury bond rose to 1.615% as demand fell.

In deal news, Walgreen slid 1.87, or 5.9%, to 30.09 after the drugstore chain said it was buying a 45% stake in pharmacy-led health and beauty group Alliance Boots for $6.7 billion in cash and stock.

In other corporate news, Oracle gained 84 cents, or 3.1%, to 27.96 after the company reported its fourth-quarter profit increased 7.5% in a surprise announcement late Monday, three days ahead of schedule.

FedEx rose 2.50, or 2.8%, to 91.01 after the package-delivery company reported a decline in fiscal fourth-quarter profit and outlined plans for a cost-cutting restructuring program.

J.C. Penney dropped 2.08, or 8.6%, to 22.25 after the department-store operator said its president, Michael Francis, was leaving after eight months at the company. Mr. Francis had been responsible for marketing the company's new strategy to consumers.

Facebook rose 50 cents, or 1.6%, to 31.91, to notch the first four-session win streak since the social network went public a month ago. The stock is now 25% higher than its June 6 post-IPO low, but remains 16% below its IPO price.

Barnes & Noble fell 61 cents, or 4%, to 14.63 after posting a loss for its fiscal fourth quarter on sales that inched higher from a year earlier.

-Write to Chris Dieterich at christopher.dieterich@dowjones.com

(END) Dow Jones Newswires

June 19, 2012 17:24 ET (21:24 GMT)