While you were sleeping: Wall St ends week on high, Bernanke upbeat on outlook

Monday 24th August 2009

US stocks rallied on Friday, while Treasuries fell and the greenback weakened after home sales jumped and Federal Reserve chairman Ben Bernanke gave an upbeat appraisal of the global economy.

The Dow Jones Industrial Average jumped 1.7% to 9505.96, the highest since early November. The Standard & Poor’s 500 climbed 1.9% to 1026.13 and the Nasdaq Composite gained 1.6% to 2020.90.

Dow Jones US Home Construction index climbed 3.4%, with construction firm Toll Brothers rising 3.7% to US$22.70 after National Association of Realtors data showed sales of previously owned homes surged 7.2% last month, the fastest pace in almost two years.

Earth-moving equipment maker Caterpillar gained about 4% to US$47.30, leading the Dow higher.

Sales in July rose to an annual rate of 5.24 million units, faster than expected. Still, the national median home price fell 15% to US$178,400 last month, reflecting the level of foreclosures.

Bernanke said economic activity “appears to be leveling out, both in the US and abroad, and the prospects for a return to growth in the near term appear good.” At the Fed's annual conference in Jackson Hole, Wyoming he predicted a slow return to normal growth rates.

Bernanke and European Central Bank President Jean-Claude Trichet said there was still work to be done by central banks to restore the global economy.

"We must urgently address structural weaknesses in the financial system, in particular in the regulatory framework, to ensure that the enormous costs of the past two years will not be borne again," Bernanke said.

Exxon Mobil gained 1.9% to US$69.92 and Chevron rose 1.6% to US$69.73 as the price of crude oil gained.

US crude futures rose 1.3% to US$73.89 a barrel on the New York Mercantile Exchange.

The Obama administration will raise its 10-year budget deficit projection to about US$9 trillion from $7.108 trillion in a report this week, Reuters reported, citing, a senior administration official that it didn’t identify.

"The new forecasts are based on new data that reflect how severe the economic downturn was in the late fall of last year and the winter of this year," said the administration official, according to the report.

The US dollar and yen weakened on Friday as Bernanke’s comments and the stronger-than-expected house sales helped reduce demand for the so-called safe haven currencies. Helping stoke the euro, figures showed gains in the region’s service and manufacturing sectors.

The euro climbed 0.5% to $1.4326 and advanced about 0.8% to 135.19 yen. The dollar strengthened 0.2% to 94.37 yen.

US Treasuries dropped on Friday as the housing data and Bernanke comments stirred optimism for economic growth.

The yield on the benchmark 10-year Treasuries rose 9 basis points to 3.55% and the 30-year bond yield climbed 9 basis points to 4.34%.

Gold futures for December delivery rose 1.4% to US$954.70 an ounce on the New York Mercantile Exchange as the dollar weakened.

Stocks also rallied in Europe on Friday. The Dow Jones Stoxx 600 Index rose 2.3% to 234.85. Among regional benchmarks, the UK’s FTSE 100 rose 2% to 4850.89, France’s CAC 40 gained 3.2% to 3615.81. Germany’s DAX 30 climbed 2.9% to 5462.74.

UBS jumped 6.4% after predicting a strong recovery in its Australian wealth management market in the next 18 months. HSBC rose 5.9%.

Germany's E.ON jumped 5.5% after Italy’s Eni said it is interested in acquiring the E.ON’s Italian gas distribution network.

BP and Royal Dutch Shell both gained more than 2% as crude oil strengthened.

Businesswire.co.nz

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