Wall St gains strongly despite grim data

US equities soared on Tuesday, rebounding from the heavy losses sustained in the previous two sessions as investors snapped up battered stocks in spite of a fresh glut of grim economic data.

Throughout the session, swings in the S&P 500 were tightly correlated with moves in the exchange rates of the euro and dollar against the yen. That suggested widespread selling of yen positions had left traders with cash to invest in US stocks.

After a wave of buying into the New York close, the S&P 500 finished up 10.8 per cent to 940.50. The Nasdaq Composite index was up 9.5 per cent to 1,649.47 while the Dow Jones Industrial Average was up 10.9 per cent to 9,065.12.

The Chicago Board Options Exchange Volatility Index, often referred to as Wall Street’s fear gauge, fell 16.3 per cent, although at 66.99 continued to indicate heightened levels of distress.

The market’s late afternoon surge came even after figures showed consumer confidence slumped to a record low in October, which Ian Shepherdson, of High Frequency Economics, described as “extraordinarily awful.” Separate data showed prices of single-family homes plunged by a record percentage in August.

Energy and telecoms were two of the biggest sectoral winners. Exxon Mobil and AT&T were among the biggest blue-chip winners, up 13.3 per cent to $74.86 and 13.2 per cent to $27.61 respectively after analysts at Morgan Stanley highlighted their “defensive” qualities.

Relatively well-received results from refiner Valero helped the energy sector. Its shares jumped 11.3 per cent to $16.81.

Materials overall gained 12.7 per cent. US Steel’s third-quarter results were also positive and the shares jumped 14.2 per cent to $35.20 even after a downbeat assessment of prospects for the fourth quarter.

The financial sector remained volatile, with large swings, particularly in the value of Morgan Stanley and Goldman Sachs. Despite early losses, Morgan Stanley closed up 10.7 per cent at $15.20 and Goldman shares ended up 0.7 per cent at $93.57.

Phil Orlando, strategist at Federated Investors, said sentiment was also helped by the continuing efforts by the US government to implement measures to help the financial sector. “There’s a recognition that these programmes will be successful [in the long term],” he said.

Traders also took comfort from further signs of easing in money markets and the market is pricing in a 50 basis point interest rate cut from the Federal Reserve on Wednesday.

Wal-Mart jumped 11.1 per cent to $55.17 after the world’s largest retailer told analysts it was “well-positioned” to deal with a global slump.

In industrials, Boeing climbed 15.5 per cent to $48.91 on the prospect of a tentative deal to end a strike.

General Motors advanced 14.7 per cent to $6.25 on reports that the hard-hit auto group was pushing for government aid to help a possible merger with
Chrysler.

Meanwhile, internet stocks were in focus after Credit Suisse initiated coverage on several in the sector. “We are cautious on US display advertising,” the analysts wrote. “Investors should position their portfolios toward what we see as more sustainable growth in search and fixed-price e-commerce.”

Google was up 11.9 per cent to $368.75 after Credit Suisse placed an “outperform” rating on the stock and a price target of $400.

Airlines were a key winner, up 4.3 per cent overall. The sector was helped after Calyon upgraded a slew of stocks due to “dramatically falling oil prices and the deep capacity cuts implemented to support ticket prices and revenue, which sharply reduced variable and fixed costs”.

Bucking the market’s upward momentum, Whirlpool lost 8.3 per cent to $45.87 after the group slashed its full-year outlook and said it would cut 5,000 jobs by the end of next year.

Britannia Bulk Holdings plunged 85.8 per cent to 27 cents after the group said there was a “very high risk” that it would default on a $170m loan.

Visa and MasterCard rose 7.3 per cent to $49.97 and 7.7 per cent to $136.01, respectively, after the duo agreed to pay $2.75bn to settle an antitrust lawsuit with
Discover Financial.