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Stocks Close at 13-Month Highs
By Sung Moss
TheStreet.com Staff Reporter
11/16/09 04:52 PM EST
NEW YORK (TheStreet) -- The major indices hit new highs for 2009, and the S&P 500 closed above the 1,100 barrier after the Federal Reserve Chairman Ben Bernanke said little to halt the rally and hours after the government released a report showing strong retail sales last month.
The Dow Jones Industrial Average rose 136 points, or 1.3%, to 10,407. The S&P 500 gained 16 points, or 1.5%, to 1109, as the Nasdaq advanced 30 points, or 1.4%, to 2198. All three indices reached their highest closing levels since October 2008.
Gains in transportation, energy and metal stocks helped buoy the indices today. The Dow Jones Transportation Average, the Amex Oil Index, the NYSE Energy Index and the Philadelphia Gold and Silver Index rose 2.2%, 1.7%, 2.1% and 2.9%, respectively.
Financial stocks slumped late after bank analyst Meredith Whitney, during an interview on CNBC, said she hasn't been as bearish in a year. Whitney said there is no fundamental grounds for the rise in many equities, and said the banking space is not well capitalized. The KBW Bank Index tracked back from session highs, finishing up by 1.1%.
Bernanke spoke to the Economic Club of New York around noon EST on Monday. Billed as a speech on the economic outlook, the Fed chairman echoed familiar themes, saying he expects "moderate economic growth to continue next year."
"My own view is that the recent pickup reflects more than purely temporary factors and that continued growth next year is likely," says Bernanke, according to a transcript. "However, some important headwinds -- in particular, constrained bank lending and a weak job market -- likely will prevent the expansion from being as robust as we would hope."
The Fed chief also remarked on the weakening dollar, though he reiterated that the fed funds rate will stay at low levels for an extended period.
"The Federal Reserve will continue to monitor these developments closely," adds Bernanke. "We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability. Our commitment to our dual objectives, together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability."
Noting the difficulty in determining asset bubbles during a question and answer session, Bernanke also said it was not obvious that there was a large misalignment in the financial system.
Stocks were boosted in the morning after government statistics showed an improving retail picture. October's retail sales figures from the Commerce Department showed that sales ticked higher by 1.4% in October, beating the 0.9% consensus increase expected by analysts. Sales declined by a downwardly revised 2.3% in September. Still, after excluding auto sales, retail sales went higher by just 0.2% in October. Analysts expected a 0.4% jump.
"When you look at the revisions in the back months and then you account for Cash-for-Clunkers, it was OK," says Paul Nolte, managing director at Dearborn Partners, of the retail data. "The consumer is still on the sidelines to a great extent. They're doing some purchasing, but certainly not in the fashion that we'd like to see. Especially when we consider the amount of contraction in the consumer debt arena, which is still ongoing and it's going to have some impact going forward on the retail sales numbers."
Nolte also partially attributes the rally to a weakening dollar, which fell to 15-month lows. The Dollar Index was down 0.6% in the afternoon.
"As it's declining, we're seeing asset classes across the board rise," adds Nolte. "As long as that persists and continues, the markets can continue to go higher even though the economic data may not be fabulous."
The weakening dollar boosted commodities throughout the day. Soaring to record levels, gold settled at $1,139.20 an ounce after surging $22.50. Crude oil settled at $78.90 after jumping $2.55 a barrel.
"We are still bearish, but we are skeptical," writes Stephen Schork, editor of The Schork Report, a daily appraisal of the energy markets. "After all, forget about fundamentals, should the dollar take another tumble this week, odds are short crude oil will be right back at $80."
Business inventories also dropped by 0.4% in September vs. a revised 1.6% drop in August. Analysts had forecast inventories to slide by 0.7%, according to Thomson Reuters.
Separately, manufacturing data from the New York Federal Reserve Bank showed that the Empire State Manufacturing Index fell to 23.51 in November vs. 34.57 in October. Analysts expected the index to slide to 30.
Earnings news was dominated by results from Lowe's
(LOW:NYSE)
. Though earnings fell 30% and sales slipped 3% in the third quarter, adjusted earnings came in line with expectations of 24 cents a share. Shares slipped 11 cents, or 0.5%, to $21.74.
The home-improvement theme will also pick up tomorrow morning, with Home Depot
(HD:NYSE)
set to report.
Pacific Sunwear
(PSUN:NYSE)
will continue a string of earnings releases from the retail sector, reporting after the close today.
Target
(TGT:NYSE)
, Sears
(SHLD:NYSE)
and Gap
(GPS:NYSE)
are also among retailers that will post earnings this week.
General Motors also reported a post-bankruptcy loss, though it expects to begin paying off loans from the U.S. and Canadian governments next month.
Stocks in Asia advanced as Japan said its gross domestic product grew at a 4.8% annual rate in the third quarter. Hong Kong's Hang Seng added 1.7% and Japan's Nikkei rose 0.2%.
The FTSE in London gained 1.6%, and the DAX in Frankfurt went higher by 2.1%.
-- Written by Sung Moss in New York
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