Stocks at Highs; Banks Rebound, Health Care Gains

Stocks were at session highs, with the Nasdaq approaching a 1 percent gain, as banks rebounded and the market reacted positively to another robust Treasury auction.

The major indexes had been trading in a narrow range for most of the day but broke out as the final two hours of trading began.

Dow component

Procter & Gamble

rose after the consumer products maker

updated its annual and first-quarter outlook

and forecast a return to organic sales growth in the second quarter.

U.S. health insurers such as Cigna and Aetna climbed as analysts said President Obama's highly anticipated speechurging Congress to act on health reform revealed no "game changers." Analysts also deemed the possibility of a public plan that would seriously undermine the companies as unlikely following the speech.

"Obama's address marks the home stretch in healthcare reform; we expect a watered-down resolution this year," Leerink Swan analyst John L. Sullivan wrote in a research note. "We expect a lowest-common-denominator bill (some health insurance curbs, subsidies for some of the uninsured, no public plan) on Obama's desk in 2009. For healthcare investors, we believe a benign end to this overhang is in sight."

The sector itself was slightly higher, with the SPDR Healthcare Select ETF edging up and improving with the broader market.

Elsewhere, Monsanto slipped after the world's biggest seed maker said its forecast for fiscal 2010 earnings were below estimates and announced plans to make deeper work force cutsthan previously announced, saying it will reduce its staff by about 8 percent to cut costs.

Initial claims for unemployment insurancefell more than expectedto a seasonally adjusted 550,000 from an upwardly revised 576,000 in the previous week. Analysts expected claims to drop to 560,000, according to Thomson Reuters.

The initial reaction to the 30-year bond auction was muted but picked up as trading continued.

Analysts have been bedeviled by the rise in stocks and drop in bond yields despite September's reputation as the worst for the market, and the political and economic headwinds confronting the markets.

"The market tried to fool the majroity of the people the majority of the time," Mike Holland, of Holland and Co., said on CNBC. "What's going on now is something that's very reminiscent of the 1970s markets when the backdrop politically and economically was really ugly and thes tocks actually did very well."

  • Watch Live: President Obama on Insurance Reform

Weakness in the financial sector had been limiting gains, but the market rallied as the SPDR Financial Select ETF, which tracks the movements of larger companies in the group, turned positive.

Walt Disney , Time Warner and CBS were among major media companies that surged after Goldman Sachs raised the U.S. entertainment sector to "attractive" from "neutral," citing a stronger-than-expected rebound in national advertising.

Additionally, UAL and U.S. Airways jumped after JPMorgan upgraded both airline companies to "overweight" from "neutral" and wrote that fundamentals for the sector were on the mend.

The Crisis: 1 Year Later - A CNBC Special Report - See Complete Coverage
The Crisis: 1 Year Later - A CNBC Special Report - See Complete Coverage

But the optimism was offset by Merck, which dropped slightly after the drugmaker said it is abandoning an experimental drugto treat acute migraines because the drug caused elevated liver enzyme levels in some cases.

In the meantime, Chevron rose after the oil giant sealed an estimated $60 billion worth of gas deals with three North Asian buyers for its massive Gorgon project in Australia, paving the way for a final investment decision in coming weeks.

Texas Instruments will continue to be in the spotlight after the chip producer raised its revenue and earnings guidance in its mid-quarter update after the bell on Wednesday, expecting to ride a gradual recovery in the global semiconductor industry.

Crude oil held above $71 a barrel following official government data that showed a wider-than-expected fall in crude stockpiles last week. Inventories fell 5.9 million barrels for the week ended September 4, compared to the previous week, according to the EIA, greater than the 1.5-million-barrel draw expected by analysts surveyed by Reuters.

Shortly after 1 pm EDT, we'll get the results from the Treasury's $12 billion auction of 30-year bonds, following strong demand in its 3-year and 10-year note auctions on Tuesday and Wednesday.


THURSDAY: Atlanta Fed Pres Lockhart Speak at 12:30 pm EDT; Fed governor Kohn participates in a panel discussion at 4:15 pm; Fed releases its latest balance sheet information at 4:30 pm.

FRIDAY: Import and Export Prices; Consumer Sentiment; Wholesale Trade; and Earnings from Campbell Soup.