Stocks Gain; S&P Hits New Post-Lehman High
Special to CNBC.com
Stocks rallied to new highs as the S&P 500 Index reached its highest close since Lehman Brothers went bankrupt in September 2008 amid light trading and several strong earnings reports.
The Dow Jones Industrial Average rose 55.03 points, or 0.5 percent, to close at 11,533.16, its highest closing value since Friday, Aug. 29, 2008.
JPMorgan , Bank of America , and American Expressled the blue-chip index higher, while 3M and Merck slipped.
The S&P 500 rose 7.52 points, or 0.6 percent, to close at 1,254.60, its highest level since the Friday before the Lehman Brothers' bankruptcy. The broad market index closed that day, Sept. 12, 2008, at 1,251.70, although it crept higher the following week—to 1,255.08.
The Nasdaq rose 18.05 points, or 0.7 percent, to close at 2,667.61, it's highest closing value since Friday, Dec. 28, 2007. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 17.
Most key S&P 500 sectors gained, led by financials, materials and energy. Consumer staples and healthcare fell.
The market is heading into end of the year on a strong note. The Dow is up about 4.8 percent for December and 10.6 percent for the year-to-date. For the month, the S&P 500 rose 6.27 percent, while it was up 12.51 percent for the year-to-date. The Nasdaq was up 6.78 percent for December, and 17.56 percent for the year-to-date.
The dollar gained slightly against a basket of currencies, as the euro fell amid news that China supports Europe's actions to contain sovereign debt troubles. Meanwhile, Moody's warned it may downgrade Portugal's debt rating.
The modestly stronger dollar didn't hurt commodities, including materials stocks and gold, which was up to more than $1,388 an ounce. The Thomson Reuters/Jefferies CRB Index rose. Oil prices, too, closed above $89 a barrel, supported by cold weather, forecasts of a drop in inventories and expectation of stronger U.S. gasoline demand.
Materials and industrials were the day's winners with shares of Rio Tinto , Posco and Caterpillar trading higher.
The market is also rallying on the heels of reports of robust holiday retail sales, said Art Hogan, chief market analyst at Jefferies.
In a note to clients, Jim O'Neill, chairman of Goldman Sachs Asset Management, declares 2011 the year the U.S. will return to "normal."Stocks will keep rising, probably another 20 percent, O'Neill wrote, and bond yields will rise as well, although perhaps shy of 5 percent, which he predicted before. O'Neill also expects the dollar could rally, although "U.S. policymakers will be eager to resist a significant increase."
Shares of AIG rose after news the U.S. Treasury plans to sell a big stake in the insurer in two stock offeringsnext year, according to Reuters. Any remaining stocks will be sold in 2012. AIG received $182.3 billion in money from the federal government during the financial crisis.
This comes after the government sold off its remaining shares in Citigroup earlier this month, marking an exit from ownership in the bailed-out banking giant with a $12 billion gross profit for taxpayers.
Shares of Internet service providers and Internet content providers all rose after the Federal Communications Commissions approved the first regulations of the Internet. The purpose was to ensure all stakeholders, including consumers, have access to the Internet, a concept called "net neutrality," through regulation, or whether the Internet should be left unregulated.
The rules passed on Tuesday treat providers including Comcast , AT&T , Verizon and Time Warner Cable more favorably than previous versions of the regulation, according to some observers.
Content providers, including Netflix , Amazon , Google and YouTube benefit, because their content can't be regulated. Providers wanted the ability to prevent data-heavy content that could slow their networks. While the FCC wouldn't allow the type of content to be regulated, providers can now perhaps charge for content.
On the M&A front, the Wall Street Journal is reporting that Genzyme is now open to an acquisition by Sanofi-Aventis , after it failed to attract an offer from rival pharmaceutical companies. Sanofi had solicited an $18.5 billion hostile offer for Genzyme, a biotechnology company, that had repeatedly been deflected. Genzyme still is rejecting a $69 a share offer by Sanofi, the Journal said.
Also, Toronto-Dominion Bankagreed to buy Chrysler Financialfrom private equity firm Cerberus Capital Management for $6.3 billion. The purchase, which will make TD one of the top five bank-owned auto lenders in North America, won't affect 2011 earnings, and will add about $100 million to adjusted 2012 earnings, TD Bank said.
Alpha Natural Resources rose after the coal company made an offer to buy rival Massey Energy , according to the Wall Street Journal.
And Dutch group DSM plans to buy vitamin-maker Martek Biosciencesfor $1.1 billion.
In earnings news, shares of Adobe Systems gained almost 5 percent after the computer-software maker posted better-than-expected earnings on Monday afternoon.
Jabil Circuit jumped more than 10 percent after the electronics manufacturing services provider reported earnings that nearly quadrupled. In addition, both RBC and Stifel Nicolaus raised their earnings target to $22 from $20.
And PayChex slipped despite the payroll and human resource service company reporting a surprising boost in earnings.
But Darden Restaurants fell after the owner of Red Lobster and Olive Garden issued guidance that missed forecasts. But Keybanc raised its price target on the firm to $56 from $50. ConAgra Foods was up after the food distributor released disappointing profitsand confirmed a low single-digit earnings growth rate for 2011.
Carnival advanced after the cruise ship operator reported better-than-expected earnings as demand continued to rise.
Carmax tumbled even after the used-car retailer reported profits and sales above expectations on strong sales. The stock had been trading at an historic high.
Nike and Red Hat are scheduled to report earnings after the bell.
Meanwhile, Toyota agreed to pay the U.S. government $32.4 million to settle an investigation in the wake of two recalls over accelerator pedals and steering relay rods.
In tech news, Apple shares rose after the iPod maker said it is on the verge of selling 1 million of its Apple TV set-top boxes. The firm is expected to reach that milestone sometime this week.
Meanwhile, Microsoft shares climbed after the tech giant said it sold more than 1.5 million cellphonescarrying Windows Phone 7 operating software in the first six weeks of launch.
And SEC is investigating the resignation of Hewlett-Packard's ex-CEO Mark Hurd, according to The Wall Street Journal.
3M denied reportsthat its top executive, George Buckley, was preparing to leave the company before his contract expired in early 2012.
Wall Street Strategies downgraded Pacific Sunwear to "sell" from "hold," and Urban Outfitters to "hold" from "buy." The brokerage also lowered Urban Outfitter's price target to $36 a share from $43.
Volume on the consolidated tape of the New York Stock Exchange was 3.4 billion shares, while 778 million shares changed hands on the NYSE floor.
New York Attorney General Andrew Cuomo filed a lawsuit against Ernst & Young for civil fraudTuesday. Cuomo accused the accounting firm of helping Lehman Brothers hide billions of dollars on its balance sheet.
On the Calendar This Week:
TUESDAY: Earnings from Nike
WEDNESDAY: MBA mortgage applications, GDP, existing home sales, oil inventories; before-the-ell earnings from Walgreen; after-the-bell earnings from Bed, Bath & Beyond
THURSDAY: NYSE early close; durable goods orders, personal income and spending, weekly jobless claims, consumer sentiment, new home sales
FRIDAY: Markets closed for Christmas
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