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Stocks Rebound Sharply as Fisher and Plosser Support Fed Tapering

NEW YORK (The Street) -- Major U.S. stock markets bounced back Tuesday, with the S&P 500 garnering its strongest session of the year, as Fed voting members Richard Fisher and Charles Plosser bolstered confidence in the economic recovery by emphasizing their support for central bank tapering.

The rebound began in earnest Tuesday, after yesterday's deep selloff, on higher-than-forecast December consumer spending numbers.

  • The S&P 500 gained 1.08% to 1,838.88, the Dow Jones Industrial Average added 0.71% to 16,373.86, the Nasdaq advanced 1.69% to 4,183.02.
  • December retail sales rose by a better-than-expected 0.7% excluding autos and 0.2% overall, the Census Bureau said. The government's U.S. import price index was unchanged in December. Business inventories rose 0.4% in November.
  • The retail sales report "continues to support signs that the economy has certainly improved and despite a messy employment report, is being driven by the consumer," Andrew Wilkinson, chief market analyst at Interactive Brokers said in a morning note.
  • The National Federation of Independent Business' small business optimism index jumped 1.4% in December on improved sales expectations.
  • Fourth-quarter earnings for the S&P 500 are, on average, expected to increase 5.32% year over year with an EPS of $27.76, according to S&P Capital IQ. S&P Capital IQ said analysts anticipate that nine sectors will post earnings growth in the fourth quarter, with telecom (78.3%) and financials (13.04%) leading the growth. Sectors expected to be the biggest laggards this quarter are energy (-8.3%) and utilities (-5.6%).
  • Dallas Federal Reserve President Richard Fisher said Tuesday that he will support tapering as long as the jobless rate continues to fall and the economy keeps growing. Concerned about inflation, he would have actually preferred a $20 billion taper. He's not seeing a bubble forming in stocks and bonds.
  • Philadelphia Fed President Charles Plosser said earlier that he'd like to see the Fed conclude its quantitative easing program before year-end. The soft, December job data has "not changed my belief that the economy has already met the criteria of substantial improvement in labor market conditions," he said.
  • Allied World Assurance (AWH - Get Report) tacked on 1.15% to $108.64 after being initiated at BMO Capital with an outperform rating.
  • Danaher (DHR - Get Report) was gaining 2.77% to $78.26 after being upgraded at Bank of America to "buy" from "neutral."
  • Intel (INTC - Get Report) was jumping nearly 4% to $26.51 after being upgraded at J.P. Morgan to "overweight" from "neutral."

-- Written by Andrea Tse in New York.

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