Stocks Close at Multiyear Highs as JPMorgan Sparks Rally
The Dow Jones Industrial Average finished up 218 points, or 1.7%, at 13,178, on Tuesday trading at its highest level since May 2008. The S&P 500 was up 24.9 points, or 1.8%, at 1396, having hit its highest level since June 2008. The Nasdaq broke 3000, a level it had failed to close above in 12 years. The index was up 56.2 points, or 1.9%, at 3040. It was the first time that the Dow settled above 13,000 and the Nasdaq closed above 3000 on the same day.
JPMorgan shares were popping 6.9% to $43.32 after the banking giant announced late Tuesday that it was hiking its quarterly common stock dividend by 5 cents to 30 cents a share and that its board had authorized a $15 billion stock buyback program.
The announcement came ahead of the expected announcement of Fed stress test results for the financial sector, which market participants thought would show that U.S. banks were bolstering their balance sheets and reserve requirements. It was expected that a number of banks would be announcing dividend boosts ahead of the results.The Federal Open Market Committee said Tuesday afternoon that they have decided to keep the federal funds rate at zero to a quarter of a percent at least through late 2014. The central bank cited a moderate expansion of the economy and a subdued outlook for inflation over the medium run, despite recent high oil and gasoline prices. Fed officials acknowledged that labor market conditions have improved and that the unemployment rate has declined notably in recent months. The statement added that household spending and business fixed investment have continued to improve and that there has been improvement in the European situation. However, the housing sector remains depressed. There was no indication of any plans to extend the existing quantitative easing program beyond June. "The wording of the statement is very close to the January text, although rather than pointing to a decline in business fixed investment the FOMC notes that along with household spending, it has advanced," says Andrew Wilkinson, chief economic strategist at Miller Tabak. Data released by the Commerce Department Tuesday showed that retail sales in the U.S. rose broadly. Sales rose 1.1% in February, in line with economists' expectations, after jumping 0.6% in January. Compared to a year earlier, sales were up 6.5%. Sales excluding auto sales rose 1.1% in February adding to a 0.6% gain in January. "What makes this something encouraging is that the strength in sales comes even as gas prices rose by over 8% in February," noted Dan Greenhaus, strategist with BTIG. Greenhaus said that the data suggested economic growth in the first quarter could be "a bit" stronger than estimated. However, "consumption growth in the U.S. is still constrained by the effects of the recession and relatively weak income growth." In a separate report from the Commerce Department, business inventories rose 0.7% in January, topping expectations for a 0.4% gain by Thomson Reuters. The rise was the largest since October, mainly due to a surge in auto inventories. On the back of encouraging retail sales data this morning and last Friday's upbeat jobs figures for February, investors will scrutinize the Fed's assessment of the economy. "In January, the FOMC declared that 'the economy has been expanding moderately' -- if that language is downgraded, it would be a dovish sign," wrote economists at Bank of America Merrill Lynch. Europe's trouble largely took a backseat on Tuesday, with Greece having avoided a disorderly default for now. Germany's DAX was up 1.37% while London's FTSE was up 1.07%. Hong Kong's Hang Seng closed up 1% while the Nikkei Average in Japan gained 0.1% overnight.
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