Thread: Stocks start 2011 with a big lift - UPDATE 93.24 points

Stocks start 2011 with a big lift

By DAVID K. RANDALL, AP Business Writer David K. Randall, Ap Business Writer – 18 mins ago

NEW YORK – Stocks started 2011 with a big lift on Monday, and that could be a promising sign for the rest of the year. Investors call it the "January barometer." According to the Stock Trader's Almanac, a gain in the Standard and Poor's 500-stock index over the first five days of January has led to annual gains nearly 90 percent of the time.

"All of the forecasts come out of Wall Street, and those expectations for the year give January a nice indicative effect of what the year will look like," said Jeffery Hirsch, the editor of the Stock Trader's Almanac.

Signs that the economy is improving pushed stock indexes higher on the first trading day of the year. Manufacturing activity and construction spending both rose more than analysts were predicting. The Institute of Supply Management's index of manufacturing activity rose in December for the 17th straight month. Separately, the Commerce Department said construction spending rose 0.4 percent in November.

The Dow Jones industrial average jumped 128 points, or 1.1 percent, to 11,706 in afternoon trading.

The Standard and Poor's 500 index gained 17, or 1.4 percent, to 1,275. The Nasdaq composite rose 42, or 1.6 percent, to 2,696.

The gains were broad. All 10 company groups that make up the S&P index rose. Financial companies led the way with a 2.3 percent jump.

Bank of America Corp. shot up 6 percent to $14.14 after the bank settled a dispute with Fannie Mae and Freddie Mac over soured mortgage investments. That was the best performance among the 30 stocks that make up the Dow index. Coca-Cola Co. had the largest fall, losing 0.9 percent to $65.20.

The better economic news dimmed the appeal of safer assets. The yield on the 10-year Treasury note, which rises as its price falls, moved up to 3.34 percent from 3.29 percent late Friday.

Small companies, which are considered riskier investments, surged. The Russell 2000, which tracks the performance of smaller stocks, jumped 1.9 percent. That's nearly twice as big as the gain posted by the Dow, which tracks 30 large companies.

That, too, could be part of a historical trend. In a pattern known as the "January effect," smaller companies tend to do better early in the year than large ones. Some of that has to do with traders buying smaller companies early in the year after selling stocks they lost money on in December in order to reap tax benefits, Hirsch said.

In corporate news, Goldman Sachs Group Inc. gained 2.6 percent to $172.58 after the New York Times reported that it bought a stake in Facebook in a deal that valued the company at $50 billion. Facebook remains a private company, though its shares are traded on private stock exchanges.

Stocks rose throughout Europe earlier in the day after a report showed that manufacturing in countries that use the euro expanded faster than analysts had forecast. The Euro Stoxx 50 index rose 0.6 percent. Benchmark indexes in France and Belgium each rose more than 2 percent.

The dollar was flat against an index of six heavily traded currencies.

Stocks in the U.S. ended mixed on Friday, which marked the last day of trading in 2010. For many investors, 2010 turned out better than expected. Every major stock market index in the U.S. increased by double digits.

The S&P 500, the market measure used by most professional investors, returned 15.1 percent after dividends. Historically, the index has returned an average of 10.01 percent a year, including dividends.

Stocks ended 2010 especially strong. The S&P gained 20 percent over the last four months of the year, capped by a 7 percent jump in December.

http://news.yahoo.com/s/ap/20110103/ap_ ... all_street

JANUARY 3, 2011, 4:49 P.M. ET.

Dow Kicks Off 2011 With 93.24-Point Jump

By DONNA KARDOS YESALAVICH

NEW YORK—Stocks started 2011 with a bang Monday, reaching fresh two-year closing highs as improved manufacturing and construction data boosted investors' outlook for the economy.

The Dow Jones Industrial Average jumped 93.24 points, or 0.8%, to 11670.75, its highest close since Aug. 28, 2008. The climb represented the measure's biggest move since Dec. 3, the third time in a row it rose on the first trading day of the year and its seventh gain in the past nine sessions.

Bank of America led the measure's climb, jumping 6.4%. The banking giant said it expects to take a provision of about $3 billion in the fourth quarter to buy back bad loans from Freddie Mac and Fannie Mae that were issued by its troubled Countrywide Financial unit. Investors were relieved to see the size of the hit from the bad-loan repurchases quantified.

Alcoa and Boeing were also strong, boosted by upgrades from analysts. Alcoa climbed 2.7% after Deutsche Bank raised its investment rating on the aluminum giant's stock to "buy" from "hold," citing "growing optimism" for higher aluminum prices and a belief that "Alcoa has turned the corner from an operational point of view." Boeing rose 1.8% after J.P. Morgan upgraded it to "overweight" from "neutral," citing an improving outlook for core commercial aircraft.

However, Intel fell 0.9%. Piper Jaffray cut its investment rating on the stock to "neutral" from "overweight," saying Intel is missing the wave of "ultramobile devices," and it expects personal-computer unit growth to decline.

The Nasdaq Composite added 38.65, or 1.5%, to 2691.52, its highest close since Dec. 26, 2007. The Standard & Poor's 500-stock index gained 14.23, or 1.1%, to 1271.87, its highest close since Sept. 3, 2008.

Kristina Peterson wraps the day in the financial markets, including why stocks rallied today from the opening bell. Plus, a discussion on how stocks are likely to fare in 2011 and why Congress is sporting a younger look.
."There's some real optimism for the market for 2011," said Malcolm Polley, president and chief investment officer at Stewart Capital Advisors. "There's a lot of things with potential for this year."

Mr. Polley noted that, historically, the third year of a presidential administration has typically been a positive year for the market. In addition, he has been encouraged by the indications for consumer spending from the Christmas shopping season.

A positive start to the year also tends to bode well for the rest of the year; since 1945, when the S&P 500 has risen on the first day of the year, it has averaged a gain of 10.6% for that year, according to Birinyi Associates.

If stocks climb in the rest of the month, that would also be a strong indication for the rest of the year; over the past 82 years, when the S&P 500 rose in January, it also rose on the year 73% of the time, according to Howard Silverblatt, senior index analyst for S&P.

Monday's gains in U.S. stocks followed rallies overseas, with Europe's markets lifted by euro-zone manufacturing data that showed the sector's expansion accelerated more than expected in December.

Boosting sentiment for the U.S., a reading on manufacturing from the Institute for Supply Management rose, with its new-orders index jumping. In addition, U.S. construction spending rose for a third consecutive month during November.

The data helped bolster investors' expectations for a host of other U.S. economic updates due this week, including retailers' December sales and the government's monthly nonfarm payrolls.

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Traders work on the floor of the New York Stock Exchange on Dec. 31, 2010. U.S. stocks closed 2010 with double digit gains.
.Among stocks in focus, Barnes & Noble climbed 9% after the book seller said its preliminary holiday same-store sales surged 9.7%, partly thanks to strong sales of its Nook e-reader device.

Clorox tumbled 2.7%. Weak sales of disinfectants, bleach and cat litter in the U.S. caused the household-products giant to project fiscal second-quarter earnings and sales below analysts' estimates.

Write to Donna Kardos Yesalavich at donna.yesalavich@dowjones.com

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