Investors extended the stock market’s rally Monday following another batch of upbeat earnings and reports that commercial lender CIT Group has made a deal with key bondholders to avoid bankruptcy.
Both the Dow Jones industrials and the Standard & Poor’s 500 index briefly surpassed multimonth highs hit in mid-June.
The CIT news helped stoke the market’s optimism that was fed last week by a string of good earnings news. The Dow and the S&P 500 are coming off their best weekly performance since the market’s spring rally began in March.
A bigger-than-expected rise in a measure of future economic activity also helped stocks. The Conference Board’s index of leading economic indicators rose 0.7 percent in June, more than the 0.4 percent forecast. It was the third straight month of increases.
U.S. stocks followed world markets higher after reports in The New York Times and The Wall Street Journal said CIT’s board approved a deal late Sunday with major bondholders to receive $3 billion in emergency funding. Both the Times and the Journal cited people familiar with the matter. CIT representatives could not immediately be reached for comment.
CIT’s future was cast in doubt after negotiations with federal regulators for bailout funds fell through. Its failure would have been a big blow to investor confidence and would have hurt industries like retailing, which has suppliers who reply on CIT for financing.
Market indicators rose about 7 percent last week. The huge advance came after a monthlong slide in stocks that was driven by reports showing the economy was not healing as quickly as hoped. But solid earnings and outlooks from companies like Goldman Sachs Group Inc., Intel Corp. and International Business Machines Corp. gave investors hope that the recession is coming to an end.
“The main reason the market has been fairly strong is we haven’t had any major disappointments in earnings,” said Joe Keetle, senior wealth manager at Dawson Wealth Management.
In late morning trading, the Dow rose 15.04, or 0.2 percent, to 8,758.98, after earlier surpassing a high of 8,799 hit in June. The S&P 500 index rose 1.12, or 0.1 percent, to 941.50, after briefly edging out its high in June of 946.21. The Nasdaq composite index rose 3.91, or 0.2 percent, to 1,890.52.
Investors are also focused on the earnings reports coming this week. On Monday, companies such as Boston Scientific Corp. and Texas Instruments Inc. are set to issue results.
Among the earnings news Monday, toy maker Hasbro Inc. said its second-quarter profit rose 5 percent, beating expectations, as strong U.S. revenue offset international sales hurt by the stronger dollar. The stock rose 3.5 percent, adding 88 cents to $26.26.
Oilfield services company Halliburton Co. said its second-quarter profit tumbled 48 percent amid sluggish exploration and production activity. But results were better than analysts forecast and its shares rose 18 cents to $21.56.
Auto parts and building products maker Johnson Controls Inc.’s fiscal third-quarter earnings dropped 63 percent but exceeded expectations. Its revenue, however, fell short of analysts’ estimates. Shares soared more than 4.9 percent, rising $1.05 to $22.57.
With the bulk of earnings reports still to come, the market has yet to hear from some key industries including retailing. If those results are disappointing, it could force investors to rethink their most recent rally. And the market still has a number of issues to deal with, including record-high unemployment and a damaged housing market.
“I would look for a little follow-through early this week that will hinge on quarterlies, but longer-term I think we’ll see some pressure come back into this market,” said Darin Newsom, senior analyst at DTN. “We’re still going to have to see better employment and housing numbers.”
On Monday, though, the CIT news and optimism over better earnings reports stoked investors’ appetite for risk. Investors moved out of safe-haven assets like U.S. Treasurys and the dollar, and into riskier bets like commodities. CIT shares surged more than 91 percent, adding 64 cents to $1.34.
Oil prices rose 9 cents to $63.65 a barrel. Prices for gold, silver and copper also rose. The dollar fell.
Bond prices fell slightly. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.67 percent from 3.66 percent late Friday.
Advancing stocks outnumbered decliners by more than 2-to-1 on the New York Stock Exchange where volume came to 324.1 million shares.
The Russell 2000 index of smaller companies rose 2.75, or 0.5 percent, to 521.97.
In afternoon trading overseas, Britain’s FTSE 100 rose 1.2 percent, Germany’s DAX index rose 0.7 percent, and France’s CAC-40 gained 1 percent. Japanese financial markets were closed for a holiday.
Copyright 2009 The Associated Press.
