S.&P. 500 Erases 2009 Losses as Stocks Jump

By JACK HEALY

Published: May 4, 2009

http://www.nytimes.com/2009/05/05/bu...

As stocks climbed on Monday, a leading stock index crossed a milestone that seemed unthinkable during the worst declines of the bear market: It turned positive for the year.

The New York Times

S.&P. 500 Erases 2009 Losses as Stocks Jump

By JACK HEALY 4:30 PM ET

As stocks climbed on Monday, a leading stock index crossed a milestone that seemed unthinkable during the worst declines of the bear market: It turned positive for the year.

The Standard & Poor’s 500-stock index, a key gauge of the broader market and the benchmark for many investors’ index funds, erased all its 2009 losses just before the close.

Stocks catapulted higher following reports that government stress tests of major banks would offer more cause for cheer than fear about the health of the financial system. Investors also gleaned some hope from signs of improvement in the housing market and the construction industry. And jitters about a swine-flu pandemic seemed to be easing.

The S.&P. 500 jumped 29.72 points, or 3.4 percent, to close at 907.24 points on Monday. This jump finally gave the index a 2009 gain of 0.44 percent after a grinding start to the year.

In contrast, the Nasdaq composite index is up 11.8 percent since the beginning of January, buoyed by gains in technology companies. On Monday, the Nasdaq rose 44.36 points, or 2.6 percent, to 1,763.56.

The Dow Jones industrial average gained 214.33 points, or 2.6 percent, to 8,426.74. Still, the Dow remains down nearly 4 percent for the year to date.

As Wall Street turns in day after day of better performance amid some encouraging signs from the economy, analysts are placing more faith in the stability of a nearly two-month rally in stock markets. Since the stock market plunged to its bear-market lows on March 9, the S.&P. 500 has bounced back nearly 33 percent.

"The fact that we’re not going down and not correcting is important," said Richard Sparks, vice president of research at Schaeffer’s Investment Research. "It shows the persistence of the rally."

Still, Mr. Sparks noted that polls of investor sentiment continued to show bearishness and skepticism, and that a considerable amount of money was still lingering on the sidelines. Many analysts worry that stocks could give back much of their gains if rising unemployment prompts a new leg down in the recession, spurring a wave of new credit losses or foreclosures.

But those concerns seemed to be distant shadows on the horizon on Monday. Financial stocks led Wall Street as investors hoped that the government’s stress tests would show that the financial system was in better shape than they had suspected. Bank of America rose 5 percent, and Wells Fargo was more than 9 percent higher.

Energy companies and materials producers climbed higher as the prices of oil and copper rose, pushed up by hints of an economic thaw.

Spending on construction rose 0.3 percent in March from February, the Commerce Department reported, mostly because of a 1.1 percent increase in public construction projects. Residential construction was down 4.1 percent from February, and a third lower than a year earlier.

Also, the National Association of Realtors reported that the number of homes with signed contracts that had not yet closed increased 3.2 percent in March from a month earlier and was slightly higher than a year earlier. Plunging home prices and lower mortgage rates have lured some potential buyers back to the housing markets, reviving some depressed markets.

European markets also rallied, on the heels of a surge that lifted Asian stock markets to their highest levels in months. Indexes in Frankfurt and Paris rose more than 2 percent, with markets in London closed for the day.

Related

"None of these banks are insolvent," said a senior government official, who did not want to be identified before the public release of the test results.

The official added: "These are manageable losses." ...

But if the test results can persuade investors that many banks are in the early stages of recovery, investors may then become more willing to invest in relatively healthy firms, like Goldman Sachs and JPMorgan Chase, which, in turn, would become more comfortable making loans.

"Everything has been in limbo, waiting for the stress tests to get out of the way," Louis Crandall, chief economist at Wrightson ICAP, a research firm. With the results, Mr. Crandall said, "we’ll start to get a sense for the extent to which the financial system can recapitalize itself." ...

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Comment Would'nt the small volume have to do with the money sitting on the sideline , and what if that money is lured back into the market at leas partialy ?

We know almos the whole world has gone into treasury ,would'nt you think some of it might be languishing to stream back into the markets ?

Don't get me wrong i don't think we're through this but so many have lost so much , they must be looking to redeem themselves and the market has made some nice gains over the last couple of months so some people must start thinking they might miss on it .

Yes it's very dangerous and scary it's the tail of the dragon and aything can happen on any given day , maybe that's part of the reason we're there.

... The Obama administration has angered Wall Street with some of its early steps, but it has also proven unable to be as tough as it initially suggested on several occasions. Last week, at the urging of Wall Street, the Senate defeated a bill that would have made it easier for homeowners to avoid foreclosure. ...