Wall Street extends rally to 8-month high

U.S. stocks jumped again Monday, giving the Dow Jones industrials their sixth straight advance, as investors got more robust earnings news from big companies and data that suggest the economy is closer to a recovery.

News that CIT had struck a financing deal that will keep the troubled commercial lender out of bankruptcy helped drive the market higher, and the S&P 500 closed at an eight-month high. A 100-point gain pushed the Dow back into the black for the year, while the Standard & Poor’s 500 climbed to its highest finish since November.

CIT Group Inc.’s deal with bondholders stoked the market’s growing sense of optimism, which got a big boost last week from a string of good earnings news.

The company’s future was cast in doubt after negotiations with federal regulators for bailout funds fell through. Its failure would have been a blow to investor confidence and would have hurt industries like retailing, which has suppliers who rely on CIT for financing.

The market also got a stream of news that bolstered the argument that the economy is heading for a recovery. The Conference Board’s index of leading economic indicators rose 0.7 per cent in June, more than the 0.4 per cent forecast.

It was the third straight month of gains in the predictor of future economic activity. Market indicators jumped about 7 per cent last week following a month-long slide driven by discouraging reports on the economy.

Solid earnings and outlooks from leading companies including Goldman Sachs Group Inc., Intel Corp. and International Business Machines Corp. gave investors hope that the worst of the recession could be past.

An even busier week of earnings reports will further shape investors’ view of the economy. Reports are due Tuesday from industrial equipment maker Caterpillar Inc. and drug maker Merck & Co.

Among the companies reporting Monday was toy-maker Hasbro Inc., which beat the market’s expectations and helped reassure investors somewhat about consumers’ willingness to spend. The Dow rose 104.21, or 1.2 per cent, to 8,848.15.

The six-day gain is the longest increase since a seven-day rise in April 2007. Wall Street’s best-known index ended at its highest level since Jan. 6. The Dow is up 35 per cent from its March low but still down 37.5 per cent from its record of 14,164.53 in October 2007.

The S&P 500 index rose 10.75, or 1.1 per cent, to 951.13, its best finish since Nov. 5. November’s lows last year came after months of brutal selling as the financial crisis intensified in the fall with the collapse of Lehman Brothers.

The Nasdaq composite index rose 22.68, or 1.2 per cent, to 1,909.29, its ninth straight advance. The index is at its highest mark since Oct. 3, during the most furious selling of the credit crisis. With the bulk of earnings reports still to come, the market has yet to hear from some key industries including retailing.

If those results are disappointing, it could force investors to rethink their most recent rally. Several factors are still hanging over the market including record-high unemployment and a damaged housing market.

Some analysts said the market could have a hard time advancing, even with more welcome developments. “The market itself has hit kind of a top here temporarily. People are already getting used to the earnings,” said Matt Lloyd, chief investment strategist at Advisors Asset Management.

On Monday, though, the CIT news and optimism over better earnings reports stoked investors’ appetite for risk. CIT jumped 55 cents, or 79 per cent, to $1.25. Commodity prices advanced and the dollar was mixed.

Oil prices rose 42 cents to settle at $63.98 a barrel. Gold rose. Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.60 per cent from 3.66 per cent late Friday.

Advancing stocks outnumbered those that fell by more than 3-to-1 on the New York Stock Exchange, where consolidated volume came to 4.9 billion shares compared with 5 billion traded Friday.

The Russell 2000 index of smaller companies rose 7.74, or 1.5 per cent, to 526.96. - AP