US stocks soar on upbeat earnings

Published: 2009/05/19

NEW YORK: Wall Street stocks soared Monday after better-than-expected earnings from home improvement retailer Lowe’s helped reinforce hopes for recovery in the recession-struck economy.

The blue-chip Dow Jones Industrial Average leapt 235.44 points (2.85 per cent) to 8,504.08. The tech-heavy Nasdaq added a hefty 52.22 points (3.11 per cent) to 1,732.36 and the broad-market Standard & Poor’s 500 index gained 26.83 points (3.04 per cent) to finish at 909.71. After trading sideways for most of the afternoon, stocks logged “impressive, broad-based gains in the final hour of trading,” Briefing.com analysts said.

Say that had capped a week in which the broad market fell nearly five per cent, snapping a streak of eight gains over the past nine weeks for Wall Street’s main indexes. “The recession is gradually moderating, but data last week provided a reminder of how difficult the road to recovery will be,” said Ryan Sweet at Moody’s Economy.com.

“Market action says folks are looking for the economy to bottom out within the next several months and then be doing moderately better by year-end,” said Al Goldman at Wachovia Securities. Treasury Secretary Timothy Geithner sounded upbeat Monday, saying “things have clearly stabilised” since the world’s largest economy sank into recession in December 2007.

But he cautioned that a recovery will be “bumpy” and “fragile for a while.” Also boosting positive momentum was a record 17 per cent rally in Indian shares on the back of the Congress-led alliance’s strong election win, reinforcing hopes for economic reform in the Asian powerhouse.

The economic calendar was bereft of major data until Tuesday, when the government reports on the battered housing market with April data on housing starts and building permits. A better than anticipated earning report from Lowe’s, the world’s second-largest home improvement retailer, stoked recovery hopes, analysts said.

“Stronger-than-expected earnings from home-improvement specialist Lowe’s Companies and a gangbusters rally in India are helping to lift spirits on Wall Street,” said Joseph Hargett at Schaeffer’s Investment Research. Lowe’s vaulted 8.08 per cent to US$19.94 after posting market-topping quarterly profit and issuing surprisingly upbeat guidance, despite weak consumer spending in the United States.

Home Depot gained 6.64 per cent to US$26.02 in Lowe’s wake. The sector leader is to report earnings before the market open Tuesday. Dow component ExxonMobil advanced 2.01 per cent to US$70.50 after crude oil jumped US$2.69 a barrel in New York. Bank of America soared 9.93 per cent to US$11.73 after Goldman Sachs raised its rating on the largest bank by deposits and recommended buying its shares.

AIG added 6.40 per cent to US$1.83. The bailed-out insurer said it would “accelerate steps” to spin off unit AIA, the largest life insurer in Asia, through a public listing in the region. -- AFP