While you were sleeping: Bank of America profit, retail sales

Friday 13th March 2009

Bank of America led a rally on the Dow Jones industrial Average after chief executive Kenneth Lewis said the biggest U.S. bank was profitable in the first two months of the year and would continue to earn money in the full year.

The lender followed the lead of Citigroup, which this week made similar comments about the first two months, bolstering optimism about the outlook for banks who have received billions of dollars in government aid and driving its shares higher.

The Dow Jones Industrial Average climbed 3.5% to 7170.06, its third daily gain. The Standard & Poor's 500 Index rose 4.1% to 750.74 and the Nasdaq Composite gained about 4% to 1426.1.

Bank of America jumped 19% to US$5.85. The shares have tumbled 87% in the past year. Citigroup rose 8.4% to US$1.67 and JPMorgan Chase gained 14% to US$23.20.

Wal-Mart Stores Inc rose 2.7% to US$48.74 after Commerce Department figures showed retail sales fell less than expected last month, soothing concern that consumers spending has stalled.

Retail sales fell 0.1% in February, after a 1.8% surge in January, according to the department. Sales excluding auto-related items rose 0.7% in the latest month.

Still, Labor Department figures showed the number of Americans filing unemployment benefit claims exceeded 600,000 for the sixth week in a row.

General Electric gained 13% to US$9.57 after Standard & Poor's cut its debt rating 1 level to AA+, downgrading a top rating that the company has held since 1956. The outlook was lowered to "negative." The shares rose amid relief the downgrade wasn't larger.

U.S. Treasury Secretary Timothy Geithner told the Senate Budget Committee that many banks would return government capital once they were on a stronger footing.

The lenders are "living with a cloud of uncertainty, which is causing them to be defensive and withhold lending, and we need to arrest that basic dynamic," Geithner said.

General Motors jumped 17% to US$2.18 after the automaker said it won't need US$2 billion of aid it had flagged as necessary this month to ensure survival.

"This development reflects the acceleration of GM's companywide cost-reduction efforts as well as proactive deferrals of spending previously anticipated in January and February," chief financial officer Ray Young said in a statement.

Bernard Madoff was jailed after admitting he was the brains behind a Ponzi scheme that may have duped investors out of as much as US$65 billion.

The former financier said he was "deeply sorry" for what he did. "I operated a Ponzi scheme through the investment advisory side of my business," told the court in New York. Madoff faces 150 years in jail.

In currency markets, the focus was on the Swiss franc after the Swiss National Bank surprised investors by entering the foreign-exchange market to weaken its currency.

The franc had its biggest tumbled against the euro since the regional currency was introduced in 1999. The euro strengthened 2.9% to 1.5234 francs.

The franc dropped more than 3% to 1.1967 per dollar. The yen fell to 126.09 versus the euro from 124.86. The euro traded at to $1.2917 from $1.2827.

The Swiss central bank followed its counterparts in the U.S. and the U.K. in cutting its benchmark interest rate close to zero as it began buying foreign currencies. The central bank said it will also buy corporate bonds. The move marked its first solo foray into foreign exchange markets since 1992, according to Bloomberg.

The Swiss rate cut helped lift the Dow Jones Stoxx 600 Index by 0.7% to 167.36. Credit Suisse Group climbed 2.4%. Carrefour rose 5.7%, leading European retailers higher, after announcing price cuts and a reduction in capital spending.

The FTSE 100 Index gained 0.5% to 3712.06 and Germany's DAX 30 rose 1.1% to 3956.22. In France, the CAC 40 rose 0.8% to 2694.25.

Crude oil jumped more than US$4 a barrel as traders bet OPEC will reiterate its commitment to production cuts when it meets this weekend. Crude oil for April delivery rose 11% to US$47.03 a barrel on the New York Mercantile Exchange.

Gold for April delivery rose 1.5% to US$924 an ounce after the Swiss central bank's currency purchases stoked concern other countries will try to drive down their currencies, boosting the appeal of the precious metal.

Copper futures for May delivery edged down 0.1% to US$1.6245 a pound on the New York Mercantile Exchange.

By Jonathan Underhill

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