While you were sleeping: Wall St gains on CIT rescue, earnings optimism

Tuesday 21st July 2009

Shares on Wall Street rallied after CIT Group Inc. secured US$3 billion in emergency funding from bondholders including Pacific Investment Management Co., buying the lender more time to restructure its debt and avoid bankruptcy.

Shares of CIT soared 79% to US$1.25 as Reuters reported the company’s board had signed off on the funding plan.

The Dow Jones Industrial Average climbed 1.2% to 8,848.15 and the Standard & Poor’s 500 gained 1.1% to 951.13. The Nasdaq Composite rose 1.2% to 1,909.29%.

Helping stocks gain, the Conference Board’s gauge of the economic outlook rose for a third month, lifting optimism the world’s biggest economy may be climbing out of its recession. The board’s outlook gauge rose a greater-than-expected 0.7%.

Heavy earthmoving equipment maker Caterpillar Inc. rose 7.9% to US$36.65, leading gainers on the Dow. Aluminium producer Alcoa Inc. rose 3.7% to US$10.60 as prices of metals advanced. Freeport-McMoRan Copper & Gold Inc., the biggest publicly traded copper producer, gained 2.7% to US$57.00 as the price of copper climbed. Toymaker Hasbro Inc. jumped 4.2% to US$26.45 after posting earnings that beat analysts’ estimates.

So far this earnings season, companies on the S&P 500 have exceeded earnings estimates by an average 15%, according to Bloomberg. Some 35 companies out of 43 beat expectations.

Legg Mason Inc. reported its first quarterly profit since December 2007 on improved returns from investments. Its shares rose 3% to US$24.94.

Lawrence Summers, director of the White House’s National Economic Council, said the U.S. economy is no longer in “freefall,” according to an interview with Bloomberg Television.

“You no longer have that sense of a collapsing economy,” he said.

The total cost to US taxpayers for rescuing financial firms and restoring the American economy may reach as much as US$23.7 trillion, Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program is to tell the House Committee on Oversight and Government Reform Tuesday in the US.

Copper rose to a nine-month high on optimism the rally in equities signals a return to global economic growth. The metal used to make pipes and wires has soared more than 74% this year.

Copper futures for September delivery gained 1.9% to US$2.469 a pound on the New York Mercantile Exchange.

Crude oil, up 42% this year, extending its advance as stocks rose and a return to risk appetite weakened the greenback.

Crude oil for August delivery edged up 0.7% to US$63.98 a barrel on the New York Mercantile Exchange.

Gold also rallied as the U.S. dollar fell against the euro, stoking the appeal of the precious metal as an alternative investment.

Gold futures for August delivery gained 1.2% to US$948.80 an ounce in New York.

The US Dollar Index, which measures the greenback against currencies of six trading partners, fell 0.8% to 78.83, the lowest reading in seven weeks.

The dollar fell to a six-week low against the euro as economic optimism and rising stocks spurred investors to chase higher-yielding, or riskier assets.

The greenback rose to $1.4234 against the euro from $1.4102 and traded at 94.20 yen from 94.19. The yen slipped to 134.14 per euro from 132.85.

Europe’s Dow Jones Stoxx 600 Index rounded out its sixth straight daily advance, gaining 1.2% to 213.22 on optimism the global slump is abating.

BHP Billiton rose 3.4%, leading advances in mining companies as the price of copper bounced. Boliden AB, Europe’s No. 2 zinc producer, jumped 14% after posting better-than-expected earnings.

Lloyds Banking Group gained 6.7% after the Sunday Times reported it may post a profit for the first six months of the year.

Volkswagen AG, Europe’s biggest carmaker, fell 5.4% after Deutsche Presse-Agentur reported Porsche may delay a decision on a merger.

The UK’s FTSE 100 rose 1.3% to 4,443.62 and France’s CAC 40 climbed 1.6% to 3,270.94. Germany’s DAX 30 rose 1% to 5,030.15.

Businesswire.co.nz

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