Though economy surprises, ECB to stick with stimulus program

The President of the European Central Bank, Mario Draghi (AP Photo/Michael Probst,file)

FRANKFURT, Germany – Europe’s economy is surprising people with its strength. But don’t look for the European Central Bank to signal a withdrawal from its stimulus efforts at Thursday’s meeting.

ECB President Mario Draghi has been cautious in recent days, stressing that the economy still needs support, especially when it comes to inflation, which is still below what the bank considers ideal.

Here’s a quick guide on what to expect from the meeting of the bank’s 25-member governing council and following news conference. It’s being held in Tallinn, Estonia, one of the occasional meetings held away from the bank’s Frankfurt headquarters.

GROWTH IS STRONG

Draghi has been going out of his way to describe the current economic upturn as a result, to a great extent, of the bank’s policies. In particular, he points to the 5 million new jobs that have been created as the 19 countries that use the euro bounce back from troubles over high government and bank debt in several member countries.

The economy expanded 0.5 percent in the first quarter and the ECB forecasts 1.8 percent growth this year.

But that brighter view of the future also assumes the stimulus continues. “A very substantial degree of monetary accommodation is still needed,” Draghi said at his last news conference, on April 27.

NO STIMULUS WITHDRAWAL – YET

The emphasis the ECB puts on its role implies that it believes growth isn’t yet strong enough for it to start dialing back on the bond-buying stimulus program it has been running since March 2015.

Each month, the bank has been purchasing 60 billion euros ($68 billion) in government and corporate bonds from banks. It pays for the purchases with newly created money.

The purchases push that new money into the economy, a step that can increase inflation. And they drive down longer-term interest rates, making it cheaper for governments and businesses to borrow and spend. The central bank has also set its short-term interest rate benchmark at a record low of zero.

Analysts expect the ECB to sketch out a roadmap for tapering the bond purchases stimulus at its September 7 meeting. They expect it to start tapering the size of the monthly purchases in early 2018 until they are ended in mid-year or later. Only after that would interest rate benchmarks go up.

INFLATION

A key aspect of Thursday’s meeting will be whether the central bank forecasts a sustained upturn in inflation, especially the core inflation figure, which does not count volatile items like the price of oil and has been stuck at a weak 0.8-0.9 percent for a year.

Recent pronouncements indicate the central bank does see inflation picking up yet. The written account of the bank’s deliberations at its April 27 meeting indicated it felt inflation pressures remained “subdued and had yet to show a convincing upward trend.”

KEY PHRASES

Look for tweaks in the bank’s written statement. Analysts expect it to say that risks to the recovery are “balanced,” instead of skewed to the downside. A provision that interest rates could go even lower might be dropped.

A bigger step would be dropping the bank’s promise that it could add even more bond purchases if needed. That promise might be dropped in July as a final prelude to the stimulus exit announcement in September.

SIGNIFICANCE

Tapering the bond purchases will have wide-ranging effects. Those would likely include higher interest costs for longer-term borrowers, such as governments and people buying houses with mortgages. Returns on savings accounts and other low-risk holdings should rise from current paltry levels, increasing their attractiveness relative to stocks. Weak companies that can’t pay normal borrowing costs might go out of business – a development that economists think would reallocate capital to more productive uses.




Troubled Italian Bank Says Capital Hole Bigger than Expected

FILE - In this file photo dated Monday, Dec. 19, 2016, the facade of a branch of the ' Monte Dei Paschi di Siena ' bank in Milan, Italy.  In a statement issued late Monday Dec. 27, 2016, the European Central Bank estimates the Monte Dei Paschi di Siena bank will need more rescue money than previously expected. (AP Photo/Antonio Calanni, FILE)

The facade of a branch of the ‘ Monte Dei Paschi di Siena ‘ bank in Milan, Italy.  (AP Photo/Antonio Calanni, FILE)

MILAN – Troubled Italian bank Monte dei Paschi di Siena will need more rescue money than previously expected, according to calculations by the European Central Bank, potentially complicating the government’s rescue efforts.

The ECB, the main regulator for banks in the eurozone, has estimated the capital shortfall at 8.8 billion euros ($9.2 billion), according to a statement issued late Monday by Monte dei Paschi.

The figure is well above the 5 billion euros that Monte dei Paschi had set as its capital increase goal, due to the fact that its capital position has deteriorated in the past month, apparently as customers withdrew deposits.

Monte dei Paschi, Italy’s third-largest bank, said it was asking the ECB for details of how it arrived at the higher figure.

The bank’s shares remained suspended from trading Tuesday at the request of Italy’s stock market regulator.

The Italian government on Friday said it was guaranteeing all of the bank’s retail customers with part of a 20 billion-euro fund approved by parliament to ensure the stability of banks.

Monte dei Paschi raised only about half of the capital independently.

The Italian financial daily il Sole 24 Ore reported Tuesday that the government would invest 6.3 billion euros to prop up the bank. The rest would come from bondholders who would take losses under new EU rules meant to spare taxpayers the cost of rescuing banks.

Monte dei Paschi was forced to raise new capital after coming up short in last summer’s EU stress test, in which it performed worst among 51 banks tested.

The government’s fund is supposed to help ease troubles also at two Veneto banks, where small investors took losses of more than 11 billion euros, as well as four small banks in central Italy.




US stock indexes notch modest losses; oil prices surge

People walk over a bridge near the European Central Bank (background) in Frankfurt, Germany, Monday, May 2, 2016. (AP Photo/Michael Probst)

People walk over a bridge near the European Central Bank (background) in Frankfurt, Germany, Monday, May 2, 2016. (AP Photo/Michael Probst)

A slide in technology and consumer-focused companies helped pull U.S. stock indexes modestly lower Thursday, offsetting strong energy sector gains.

A broad swath of retailers, from department stores to fast-food chains, also notched losses, while most of the big gainers were oil production and drilling companies.

They got a boost from a report indicating fuel stockpiles fell precipitously last week. The price of U.S. crude also jumped on the report, and closed nearly 5 percent higher.

U.S. bond yields also surged, as traders reacted to the European Central Bank’s decision to leave its key interest rates unchanged and hold off on extending a stimulus program.

Still, in the absence of any major new economic data, the stock indexes continued a recent pattern of mostly sluggish trading.

“It’s been many, many days since we’ve had a substantive move either to the upside or the downside in the market,” said Erik Davidson, chief investment officer for Wells Fargo Private Bank. “It still feels like a holiday week.”

The Dow Jones industrial average lost 46.23 points, or 0.3 percent, to 18,479.91. The Standard & Poor’s 500 index slid 4.86 points, or 0.2 percent, to 2,181.30.

The sell-off in technology stocks weighed on the Nasdaq composite index, which fell 24.44 points, or 0.5 percent, to 5,259.48. The tech-heavy index set all-time highs on Tuesday and Wednesday.

Apple slid 2.6 percent a day after the consumer electronics giant introduced its newest slate of products, including a new iPhone that doesn’t come with an analog headphone jack. The stock shed $2.84 to $105.52.

Investors also got a dash of tech sector deal news. Hewlett Packard Enterprise agreed to spin off part of its business software unit to Micro Focus in a deal valued at $8.8 billion. The pact calls for HP Enterprise to remain majority owner of the new company. Shares in HP Enterprise slid 71 cents, or 3.2 percent, to $21.38.

Separately, Intel said it will spin its cybersecurity business into a new company called McAfee for $3.1 billion in cash. Private equity firm TPG will invest $1.1 billion in the new company and own a majority stake. Intel slipped 2 cents to $36.44.

All told, technology stocks were the biggest decliner in the S&P 500, shedding 0.9 percent. The sector is up 9.1 percent this year.

“The tech sector has been strong and outside of today continues to be strong,” said Willie Delwiche, an investment strategist at Baird.

Investors hammered retailers Tractor Supply and Pier 1 Imports.

Tractor Supply slumped 16.9 percent after the farming and hardware goods retailer said its business is being hurt by poor economic conditions in rural, energy-producing areas where it does most of its business, and other factors. The stock was the biggest decliner in the S&P 500 index, shedding $14.15 to $69.38.

Pier 1 Imports tumbled 15 percent after the home decor retailer gave weak quarterly guidance and said its president and CEO will leave the company at the end of the year. The stock slid 72 cents to $4.08.

Several oil drilling and production companies rose on the latest oil stockpiles figures, pushing the S&P 500’s energy sector 1.7 percent higher. The sector is up 17.4 percent this year.

Chesapeake Energy rose 93 cents, or 13.7 percent, to $7.74, the biggest gainer in the S&P 500 index. Diamond Offshore Drilling gained $1.43, or 9 percent, to $17.40. Murphy Oil climbed $1.90, or 6.8 percent, to $29.75.

Traders also bid up crude oil prices. Benchmark U.S. crude rose $2.12, or 4.7 percent, to close at $47.62 a barrel in New York. Brent crude, used to price international oils, gained $2.01, or 4.2 percent, to $49.99 in London.

The news out of the European Central Bank helped ease demand for U.S. bonds, driving their prices lower and pushing yields higher. The yield on the 10-year Treasury rose to 1.60 percent from 1.54 percent late Wednesday.

“They’re not adding more stimulus, and that maybe makes people feel less like they need to pile into U.S. bonds,” said Delwiche.

At a news conference, ECB President Mario Draghi seemed relatively confident about the economy and less inclined to hint at more stimulus than some analysts had expected. He urged governments to do their part.

Despite Draghi’s more confident tone, the ECB will have to take more stimulus action at its October or December meetings, analysts said.

News of the ECB’s decisions weighed on most of Europe’s major stock indexes. Germany’s DAX fell 0.7 percent, while France’s CAC-40 declined 0.3 percent. The FTSE 100 index of leading British shares rose 0.2 percent.

Earlier, some markets in Asia closed higher following a report showing that imports rose in China last month for the first time since late 2014, while a contraction in exports narrowed. The Hang Seng index in Hong Kong gained 0.8 percent. Seoul’s Kospi added 0.1 percent, while India’s Sensex rose 0.3 percent to 29,006.18. Japan’s Nikkei 225 index fell 0.3 percent.

In other energy trading, wholesale gasoline rose 7 cents, or 5.2 percent, to $1.42 a gallon. Heating oil added 6 cents, or 3.9 percent, to $1.48 a gallon. Natural gas rose 13 cents, or 4.9 percent, to $2.81 per 1,000 cubic feet.

Among metals, gold slid $7.60 to $1,341.60 an ounce, while silver fell 17 cents to $19.68 an ounce. Copper held steady at $2.10 a pound.

In currency markets, the dollar strengthened to 102.49 yen from 101.75 on Wednesday. The euro climbed to $1.1257 from $1.1245.




European Central Bank: States Must Do More to Help Economy

FILE- In this Thursday, April 21, 2016 file photo, president of European Central Bank, ECB, Mario Draghi speaks during a news conference after a meeting of the governing council in Frankfurt, Germany. The bank’s 25-member governing council, headed by Draghi, decides interest rate benchmarks and other monetary policy steps for the 19 countries that use the euro currency, when it meets Thursday, Sept. 8, 2016 in Frankfurt. (AP Photo/Michael Probst)

In this Thursday, April 21, 2016 photo, president of European Central Bank, ECB, Mario Draghi speaks during a news conference after a meeting of the governing council in Frankfurt, Germany.  (AP Photo/Michael Probst)

FRANKFURT, Germany – The European Central Bank left its stimulus measures on hold Thursday and warned governments that they need to do more to help the eurozone economy grow and push inflation up to healthier levels.

The bank kept its key interest rates on hold and decided against extending the duration of its existing bond-buying stimulus program as it monitors the impact it is having on the economy.

President Mario Draghi told a news conference that governments’ implementation of “structural reforms needs to be substantially stepped up to reduce structural unemployment and boost potential output growth.”

He added that countries that eurozone governments that have the capacity to spend more should do so.

The central bank faces stubbornly low annual inflation of only 0.2 percent despite pumping 1 trillion euros ($1.1 trillion) in newly printed money into the banking system through bond purchases since March, 2015. The purchases, made at a rate of 80 billion euros a month, are set to continue at least through March, 2017 or until inflation convincingly picks up.

The bank left that earliest end date unchanged. Some analysts thought the bank might commit to a longer program. The central bank’s 25-member governing council also left its benchmark rate at zero and its rate on deposits from commercial banks at minus 0.4 percent.

The ECB’s decision to hold off more stimulus and Draghi’s comments saw European stocks drop, with the German DAX down 1.2 percent. The euro rose, gaining 0.7 percent on the day to $1.1318.

Its staff’s new economic estimates showed inflation is expected to increase only gradually. They trimmed their inflation projection for next year to 1.2 percent from 1.3 percent, but left its outlook for 2018 unchanged at 1.6 percent. That indicates it sees itself getting gradually closer to its goal of just under 2 percent over the longer term.

The ECB faces worries about the economy on several fronts. While the eurozone is enjoying moderate growth, inflation continues to lag well below target, despite a raft of stimulus measures, and unemployment is high at 10.1 percent and falling only slowly.

Its stimulus measures so far have included cutting the benchmark interest rate to zero, and the rate on deposits from commercial banks to minus 0.4 percent. The negative rate is in effect a tax aimed at pushing banks to risk lending the money rather than stash it at the central bank’s super-safe overnight deposit facility. It has also offered ultra-cheap loans to banks, and offered unlimited amounts of short-term credit against collateral.

Added uncertainty about future growth has come from the British vote June 23 to leave the European Union and its tariff-free trade zone. Britain would have to renegotiate its trade conditions with the EU over several years, and no one can say now how things will turn out. So far, economic data do not suggest a major impact.

Europe’s banking system remains another drag on growth, as low profits overall and large amounts of bad loans in Italy constrict banks’ ability to pass on the ECB’s low interest rates to their clients.

But there are also concerns that the ECB cannot do it all and that governments will have to take difficult pro-growth steps if the eurozone is to enjoy a truly robust recovery. Draghi and other ECB officials have stressed that elected governments that have the money should be spending more on infrastructure and taking steps to reduce burdensome regulations that make it harder to start and grow a business.




US stocks take biggest losses in nearly a month

Stock traders work at the New York Stock Exchange, Thursday, Feb. 11, 2016, in New York. (AP Photo/Mark Lennihan)

Stock traders work at the New York Stock Exchange in New York. (AP Photo/Mark Lennihan)

NEW YORK – U.S. stocks took their biggest loss in almost a month on Tuesday as investors worried about the health of the U.S. economy and sold shares in retailers and car companies. Machinery companies also fell and the price of oil continued to decline.

Travel companies fell after cruise line operator Royal Caribbean cut its projections for the year, and automakers and suppliers fell after car companies reported lower U.S. sales for the month of July. Banks finished lower as investors worried about the health of banks in Europe. While stocks set all-time records as recently as July 22, they’ve been trading in a very narrow range for the last few weeks. Since stocks aren’t making big gains, investors are sensitive to signs of trouble for the U.S. economy, like weaker sales of autos or last week’s disappointing GDP report.

“The market had just rallied… and now it’s sort of paused,” said Jim Paulsen, the chief investment strategist for Wells Capital Management. “Any weak reports get magnified,” he said.

The Dow Jones industrial average fell 90.74 points, or 0.5 percent, to 18,313.77. The Standard & Poor’s 500 index lost 13.81 points, or 0.6 percent, to 2,157.03. The Nasdaq composite slid 46.46 points, or 0.9 percent, to 5,137.73. The Dow has fallen for seven days in a row, and Tuesday was the worst day for U.S. stocks since July 5.

Auto companies reported lower U.S. sales in July as a heatwave kept buyers at home. General Motors said its sales fell 2 percent and Ford said sales fell 3 percent. After six straight years of growth, auto sales have reached record levels and are starting to plateau. GM stock shed $1.37, or 4.4 percent, to $29.93 and Ford lost 54 cents, or 4.3 percent, to $11.94. Car retailers CarMax and AutoNation and supplier BorgWarner all fell.

Cruise line operator Royal Caribbean cut its forecasts for the year as the strong dollar continues to hurt its results. That left Royal Caribbean’s stock down $4.51, or 6.3 percent, to $67.35. Other consumer companies like retailers Nordstrom and Kohl’s and office supply chain Staples all stumbled.

Citigroup retreated 43 cents, or 1 percent, to $42.99 and Morgan Stanley fell 50 cents, or 1.8 percent, to $28. Bank stocks in Europe tumbled for the second day in a row. The losses extended to banks that were effectively given a clean bill of health by the European Banking Authority in last Friday’s stress tests.

Industrial and transport companies struggled. Delta said a revenue measurement fell in July and its stock lost $3.09, or 7.8 percent, to $36.39 and American Airlines lost $2.09, or 5.9 percent, to $33.51. Emerson Electric, which makes valves and process controls systems, posted disappointing quarterly results. It gave up $2.75, or 4.9 percent, to $53.03. Tech stocks also lost ground. Apple fell $1.57, or 1.5 percent, to $104.48 and electronic storage company Seagate Technology slid $1.78, or 5.5 percent, to $30.65 despite a solid quarterly report.

Oil prices continued to drop, extending a slide that has lasted more than two weeks. Benchmark U.S. crude fell 55 cents, or 1.4 percent, to $39.51 in New York. U.S. crude hadn’t closed under $40 a barrel since April 8. Brent crude, which is used to price international oils, sank 34 cents to $41.80 a barrel London.

Drugstore chain and pharmacy benefits manager CVS Health raised its 2016 forecasts as specialty drug prices kept rising and deals for Omnicare and Target’s pharmacy and clinic unit boosted its results. Its stock rose $4.57, or 4.9 percent, to $98.06.

Discovery Communications, the company behind TLC, Animal Planet and other channels, reported profit that was larger than analysts expected as its U.S. business strengthened. Its stock gained $1.65, or 6.7 percent, to $26.42.

In other energy trading, wholesale gasoline rose 1 cent to $1.31 a gallon. Heating oil held steady at $1.26 a gallon. Natural gas fell 4 cents to $2.73 per 1,000 cubic feet.

The price of gold rose $13, or 1 percent, to $1,372.60 an ounce, and silver jumped 20 cents, or 1 percent, to $20.70 an ounce. Copper added 1 cent to $2.21 a pound.

Germany’s DAX and France’s CAC 40 both lost 1.8 percent. Britain’s FTSE 100 fell 0.7 percent. Japan’s Nikkei 225 lost 1.5 percent. While the Japanese government approved a new economic stimulus package worth about $275 billion, investors were skeptical the measure will work. South Korea’s Kospi lost 0.5 percent to 2,019.70. China’s Shanghai Composite Index edged up 0.6 percent.

Bond prices fell. The yield on the 10-year Treasury note edged up to 1.55 percent from 1.52 percent. The dollar fell to 100.88 yen from 102.35 yen and the euro rose to $1.1227 from $1.1169.

Puerto Rico Stocks

Company Symbol Price $ Change $ Change % Volume
Evertec Inc. EVTC 17.12 -0.09 -0.52 381,833
Popular Inc. BPOP 33.90 +0.36 +1.07 724,784
First BanCorp FBP 4.42 -0.12 -2.64 461,519
Triple-S GTS 24.49 -0.40 -1.61 81,693
OFG Bancorp OFG 10.51 -0.08 -0.76 245,230

 




Stronger Economy Lets ECB Kick Back, Let Stimulus Work

FRANKFURT, Germany – Europe’s economic recovery is finally showing signs it might be the real deal, after years of sluggishness and false starts.

And that means the European Central Bank likely won’t have to step up its ongoing 1.74 trillion-euro ($1.93 trillion) stimulus program when it meets this week.

Fear not – the chief monetary authority for the countries that use the euro will go on pumping newly printed money into the European economy in an effort to raise inflation. But that’s only due to measures that were already decided at previous meetings, and which are either still running or just now being implemented.

FILE - In this Thursday, Nov. 12, 2015 file photo President of the European Central Bank Mario Draghi as he addresses the committee on economic and monetary affairs at the European parliament in Brussels. Europe’s modest economic recovery is finally showing signs it might be the real deal, after years of sluggishness and false starts. And that has helped European Central Bank head Mario Draghi  hit the pause button on his 1.5 trillion euro stimulus machine. (AP Photo/Geert Vanden Wijngaert, File)

In this, Nov. 12, 2015 photo, President of the European Central Bank Mario Draghi addresses the committee on economic and monetary affairs at the European parliament in Brussels. (AP Photo/Geert Vanden Wijngaert, File)

So analysts don’t expect any new stimulus jolts to be announced at Thursday’s meeting of the bank’s 25-member governing council in Vienna. There’s little sign that President Mario Draghi and Co. are ready to drop more stimulus news. Some economists are saying don’t expect anything more for the rest of this year, if at all.

The ECB is holding steady just as the U.S. Federal Reserve seems to be moving close to a rate increase at its June meeting. It hiked its key rate in December from near zero to a range between 0.25 percent and 0.5 percent, but then held off any more increases amid unsettling swings in stock markets. Global jitters seem to have eased since then. The U.S. recovery is more advanced, so Fed chief Janet Yellen can contemplate withdrawing some stimulus.

There are two big factors that should let the ECB kick back for a few months at least.

First, the economy in the 19 countries that share the euro currency is finally showing signs of a more robust and lasting recovery after a miserable six years in which it was battered by global and local crises. The eurozone grew 0.5 percent in the first quarter from the quarter before. It finally regained the level of output it had in the first quarter of 2008, before the global financial crisis associated with the collapse of U.S. investment bank Lehman Brothers, and before a crisis over high debt in some countries that almost broke up the currency union. Figures published Monday showed that business and consumer optimism rose to a four-month high in May, while inflation expectations picked up across a range of businesses. Auto sales have risen for 32 straight months.

Second, oil prices have crept up, edging over $50 per barrel last week for the first time since July 2015. That should give the ECB a tiny bit of help by raising inflation. Economist Carsten Brzeski at ING-DiBa wrote in an email that “higher oil prices should lead to the first upward revision of the ECB’s staff inflation forecasts since… early 2015.” That was when the bank launched a major stimulus effort through bond purchases with newly printed money dubbed quantitative easing, or QE.

The last ECB projections in March foresaw only 0.1 percent inflation this year and 1.3 percent in 2017. That’s well below the bank’s goal of just under 2 percent, considered compatible with growth and jobs.

Meanwhile, June will see the implementation of two stimulus measures decided April 21. Those are the decision to purchase high-quality corporate bonds and to offer banks ultra-cheap long-term loans. Both steps are aimed at increasing lending, business and consumer spending, and, in theory, higher prices as demand for goods increases.

The ECB is already purchasing 80 billion euros ($89 billion) in government through at least March 2017 and some private-sector bonds in a program that began in March 2015. Those purchases hand banks money that didn’t exist before in return for their bonds. That’s something only a central bank – the legal issuer of the currency – can do and aims to boost lending and business activity.

Additionally, the ECB has cut its benchmark interest rate to zero. Banks that deposit funds for safety at the ECB are even charged a negative interest rate of 0.4 percent, a step aimed at pushing them to lend it instead.

Europe’s recent upturn, of course, faces risks that could knock it off track. That’s why Draghi will likely sound a bit gloomy. He doesn’t want anyone to think he’s about to turn off the tap.

With reason. For one, Britain votes June 23 on whether to leave the EU. A British exit, or Brexit, could shake Europe’s recovery.

“Of course, it remains to be seen if the May-April improvements in eurozone consumer and business confidence can be sustained or whether renewed falls occur,” says Howard Archer of IHS Global Insight.

“There are certainly a number of downside risks, including still appreciable global economic uncertainties, the possibility of the U.K. voting to leave the EU, and the danger of further terrorist attacks in Europe.”

The Associated Press

 




US Stocks End Nearly Unchanged

FILE - In this Oct. 2, 2014, file photo, the statue of George Washington on the steps of Federal Hall faces the facade of the New York Stock Exchange. European and Asian stocks extended gains Monday, March 14, 2016, on expectations that central bankers meeting this week will keep intact policies supporting equity markets in some of the world's biggest economies. (AP Photo/Richard Drew, File)

The statue of George Washington faces the New York Stock Exchange. (AP Photo/Richard Drew, File)

NEW YORK – U.S. stocks barely budged, finishing mixed as lower oil prices pulled energy companies lower while hotels and travel-related companies rose.

Trading was quiet Monday ahead of the Federal Reserve’s meeting later this week, which is expected to shed some light on the possibility of a future increase in benchmark interest rates.

The price oil fell 3 percent. Travel-related companies rose after a consortium led by China’s Anbang Insurance Group offered to buy Starwood Hotels.

The Dow Jones industrial average rose 15 points, or 0.1 percent, to close at 17,229.

The Standard & Poor’s 500 index fell 2 points, or 0.1 percent, to close at 2,019. The Nasdaq composite rose 1 point to close at 4,750.

 




Stock Market Exends Rally to a 4th Week as Energy Recovers

NEW YORK – A jump in crude oil and a rise in European markets set off a rally in U.S. stocks to cap a four-week winning streak for major indexes.

Investors bought across industries from the start of trading on Friday. Drillers, refiners and other energy companies rose sharply as the price for U.S. crude hit a high for the year. Devon Energy jumped 11 percent and Southwestern Energy gained 10 percent.

Just a month ago, investors were dumping shares amid talk of a possible U.S. recession. The Standard & Poor’s 500 index fell to almost a two-year low. But confidence has returned as data has suggested the U.S. economy is strengthening.

“While things aren’t great, they’re not the disaster we thought,” said Bill Strazzullo, chief market strategist at Bell Curve Trading. “We’ve rallied after a horrendous start to the year.”

The S&P 500 is up now nearly 11 percent from Feb. 11.

On Friday, the S&P 500 gained 32.62 points, or 1.6 percent, to 2,022.19. The Dow Jones industrial average rose 218.18 points, or 1.3 percent, to 17,213.31. The Nasdaq composite climbed 86.31 points, or 1.9 percent, to 4,748.47.

U.S. crude gained after the International Energy Agency said signs that the market has “bottomed out” have emerged. Energy companies have been shutting down rigs and laying off thousands of workers as oil prices plunged to around $30 per barrel, from well over $100 per barrel just two years ago.

U.S. crude has risen 47 percent from a 13-year low of $26.21 a month ago.

Bank stocks also rose sharply. That sector had been beaten down in recent weeks as investors worried about loans to highly leveraged energy companies going bad.

The rally has got some investors worried, though.

Chief Equity Strategist Phil Orlando of Federated Investors said the “terrific four-week run” makes him a “little nervous.” Among his concerns are a steeper China slowdown, a U.S. dollar strengthening even more and hurting U.S. exports, no relief from the corporate profits drop over the last year and more surprises in the presidential election.

“Don’t discount the fiscal policy uncertainty of the election,” he warned.

Xavier Smith, manager of the Centre Global Select Equity Fund, said he doesn’t buy the oil rally, either.

“Oil is a proxy for the overall economy, and it’s not going on four cylinders anywhere,” Smith said. “So why would oil be strong? It doesn’t make any sense.”

European markets rose sharply as investors hoped that the European Central Bank’s latest blast of stimulus policies would help revive the region’s economy. Germany’s DAX gained 3.5 percent, France’s CAC 40 advanced 3.3 percent and Britain’s FTSE 100 rose 1.7 percent.

The ECB moves included three interest rate cuts, loans to banks, and the expansion of a bond-buying stimulus program. Shares in banks, which will be supported by the ECB loans, were among the biggest gainers.

Investors turn their attention to a meeting of the U.S. Federal Reserve next week. Unlike its counterparts in Europe and Japan, the Fed is looking to wind down its economic stimulus, though most investors do not expect it to tighten credit next week. The Fed raised rates for the first time in nine years in December.

Among stocks making big moves, driller Anadarko Petroleum rose $3.79, or 9 percent, to $46.29 after saying it would cut 1,000 workers, or 17 percent of its work force.

Power company Pepco Holdings fell $2.18, or 9 percent, to $22.07 after officials for the District of Columbia where it operates rejected a proposal to salvage its troubled $6.8 billion merger with Exelon Corp. District regulators rejected the merger twice before.

U.S. crude added 66 cents, or 1.7 percent, to $38.50 per barrel on the New York Mercantile Exchange Brent crude, which is used to price international oils, gained 34 cents, or 0.8 percent, to $40.39 a barrel. Wholesale gasoline fell 0.5 cents to $1.444 a gallon, heating oil rose 0.2 cents to $1.218 a gallon and natural gas gained 3.4 cents to $1.822 per 1,000 cubic feet.

The dollar strengthened to 113.70 yen from 113.11 yen while the euro fell to $1.1157 from $1.1196.

U.S. government bonds fell, pushing their yields higher. The yield on the 10-year Treasury note rose to 1.98 percent from 1.93 percent late Thursday

Industrial and precious metals were mixed. Gold fell $13.40 to $1,259.40 an ounce. Silver climbed 5.6 cents to $15.61 an ounce and copper rose 2.1 cents to $2.24 a pound.




Stock Market Posts Meager Gains, Led by Energy Companies

A sign for Wall Street outside the New York Stock Exchange. (AP Photo/Mark Lennihan, File)

A sign for Wall Street outside the New York Stock Exchange. (AP Photo/Mark Lennihan, File)

NEW YORK – Stocks wavered throughout the day but managed to eke out modest gains Monday as oil prices rose.

Investors bought drillers, refiners and other energy companies as the three-week rise in crude continued. Six of 10 industry sectors in the Standard & Poor’s 500 rose, helping the index extend its winning streak to fifth day.

The ride up was bumpy, though, and the gains were slight. The S&P 500 gained just 0.09 percent. That was its smallest increase in seven weeks.

“Today’s volatility is mostly about a little profit-taking and taking a pause after such a strong advance in recent days,” said Jim Paulsen, chief investment strategist at Wells Capital.

The Dow Jones industrial average increased 67.18 points, or 0.4 percent, to 17,073.95. The S&P 500 edged up 1.77 points to 2,001.76. The Nasdaq composite, which is heavily weighted with technology stocks, gave up 8.77 points, or 0.2 percent, to 4,708.25.

Shares of consumer products and technology companies fell. Chipmaker Micron Technology fell 30 cents, or 2.5 percent, to $11.58.

With no big U.S. economic or earnings announcements, news from abroad appeared to drive much of the trading.

The price of iron ore jumped 17 percent on news over the weekend that China plans to run up its deficit to stimulate its economy. China is the world’s largest buyer of this raw material for steel, and mining companies soared on the news. Cliffs Natural Resources rose 54 cents to $3.43, a gain of 19 percent.

China also lowered its official growth target this year to 6.5 to 7 percent. The slowdown has been rattling markets, although fears that the trouble could spill over into the U.S. economy have eased in recent weeks as encouraging U.S. data suggest growth is solid. On Friday, the government reported that employers added 242,000 jobs to their payrolls last month, more than had been expected.

“The market is correctly pricing in a lower chance of global recession or U.S. recession,” said Brian Nick, head of tactical asset allocation at UBS Wealth Management Americas.

Investors are anxious over a policy meeting of the European Central Bank on Thursday as inflation across the 19-country eurozone has fallen back below zero. They expect further stimulus from the central bank, possibly including a cut in deposit rates further into negative territory. The Bank for International Settlements, which helps coordinate monetary policy around the world, warned on Monday of a “gathering storm” as central banks run out of room to stimulate their economies.

European markets were mostly lower, with France’s CAC-40 and Britain’s FTSE 100 each losing 0.3 percent. Germany’s DAX dropped 0.5 percent.

Benchmark U.S. crude added $1.98, or 5.5 percent, to close at $37.90 a barrel on the New York Mercantile Exchange.

The 10 biggest gainers in the S&P 500 were drillers and other energy-related companies. Murphy Oil rose $2.99, or nearly 13 percent, to $26.69.

In Asia, Tokyo’s Nikkei retreated 0.6 percent and Hong Kong’s Hang Seng shed 0.1 percent. Seoul’s Kospi advanced 0.1 percent.

In other oil trading, Brent crude, which is used to price international oils, rose $2.12, or 5.5 percent, to $40.84 a barrel in London

U.S. government bond prices fell. The yield on the 10-year Treasury note rose to 1.90 percent from 1.87 percent on Friday. The euro rose to $1.1013 from $1.0999 and the dollar fell to 113.27 yen from 114.02 yen.

Precious and industrial metals futures ended mixed. Gold fell $6.70 to $1,264 an ounce, silver slipped six cents to $15.63 an ounce and copper rose a penny to $2.28 a pound.




US Stocks Rising for the Second Day in a Row in Broad Rally

The American flag flies above the Wall Street entrance to the New York Stock Exchange. (AP Photo/Richard Drew, File)

The American flag flies above the Wall Street entrance to the New York Stock Exchange. (AP Photo/Richard Drew, File)

NEW YORK – Stocks closed broadly higher as the market notched its second sizable gain in a row. Retail and industrial stocks made the biggest gains as they were lifted by company earnings, some good news from China’s economy, and hope that Japan’s struggling economy will get another boost.

Indexes were higher all day and almost matched the big gains they made on Friday. Strong quarterly results gave some company stocks a boost and investors worried a bit less about China and Japan.

For a change, stocks traded higher even though the price of oil slumped. Investors were skeptical that OPEC nations will sign off on a deal to freeze production, so U.S. crude sank after a big rally on Friday.

The Dow Jones industrial average added 222.57 points, or 1.4 percent, to 16,196.41. The Standard & Poor’s 500 index rose 30.80 points, or 1.7 percent, to 1,895.58. The Nasdaq composite climbed 98.44 points, or 2.3 percent, to 4,435.96.

The S&P 500 had climbed 2 percent on Friday. It had been two months since the S&P 500 rose at least 1 percent for two consecutive days. The U.S. market was closed Monday for the Presidents Day holiday.

ADT surged after the home security company accepted an offer from investment company Apollo Global Management worth $42 per share, or $6.94 billion. Its stock rose $12.77, or 47.5 percent, to $39.64. Apollo Global added 72 cents, or 5.4 percent, to $14.12.

Amazon rose $14.02, or 2.8 percent, to $521.10. Home Depot rose $3.11, or 2.7 percent, to $119.43 and competitor Lowe’s gained $2.56, or 3.9 percent, to $67.43.

Hormel, the maker of Spam and Dinty Moore stew among other foods, had its best day in almost seven years after the company posted a stronger-than-expected quarterly profit and raised its forecast for the year. Its stock climbed $2.94, or 7.1 percent, to $44.44. It’s up 60 percent over the last year.

Restaurant Brands, the parent company of Burger King and Tim Hortons, jumped $1.81, or 5.7 percent, to $33.82 after the company said an important sales measurement rose at both of its chains in the fourth quarter.

Hospital stocks tumbled after Community Health Systems said admissions decreased in the fourth quarter. That’s partly because it had more patients last year with respiratory illnesses and the flu. The company took a loss as it absorbed impairment charges and set aside more money to cover unpaid bills.

The stock plunged $4.12, or 22.1 percent, to $14.56.

It’s been a bad couple of weeks for company earnings. Three-fourths of the companies listed on the S&P 500 have reported their quarterly results, and earnings are expected to fall almost 5 percent compared with a year ago, according to S&P Capital IQ. That’s mostly because of plunging oil prices, which are pummeling energy company profits.

Analyst Lindsey Bell of S&P Global Markets Intelligence says that we’re in the middle of a cycle that will see S&P 500 profits fall for four quarters in a row, but the market is focused on other issues, including concerns about the health of China’s economy and central bank policy.

“You don’t hear a lot of people talking about how we’re going to have a nearly five-percent decline in earnings,” she said.

Bell says earnings will start growing again later this year because companies have lowered the bar. Still, analysts are swiftly lowering their estimates for 2016. She says analysts now expect earnings growth of 2.9 percent, down from 7.4 percent at the start of 2016.

Daily deals site Groupon notched a large gain for the second day in a row. The stock rose $1.19, or 41.2 percent, to $4.08 after Chinese e-commerce site Alibaba disclosed it had taken a 5.6 percent stake in the company. Groupon stock jumped 29 percent Friday after the company reported its fourth-quarter results, but the stock is still in a big slump over the last year.

Tuesday started with gains for Asian stocks. China’s central bank guided the yuan higher, pushing the currency close to its highest level of the year. That’s a positive sign for the Chinese economy. Along with many other factors, weakness in the yuan this year has caused investors to worry about the health of the Chinese economy. China’s official news agency also said new yuan loans climbed in January.

In Japan, a report showed the economy was weaker than expected, but that still gave stocks a boost because investors hope it will convince the Bank of Japan to take further steps to stimulate the economy.

Japan’s Nikkei added 0.2 percent after soaring 7.2 percent the day before, its biggest daily gain since September. Hong Kong’s Hang Seng advanced 1.1 percent.

Stocks in Europe mostly fell. Germany’s DAX lost 0.8 percent and France’s CAC 40 slipped 0.1 percent. However Britain’s FTSE 100 rose 0.7 percent.

Russia and Saudi Arabia said Tuesday they had reached a deal to freeze their oil output, but the deal won’t take effect unless other OPEC nations also agree to it. Analysts say Iran probably won’t sign on because it wants to increase production following its period of sanctions.

U.S. crude lost 40 cents, or 1.4 percent, to $29.04 a barrel in New York. It jumped 12 percent Friday, its biggest gain in years.

Brent crude, a benchmark for international oils, gave up $1.21, or 3.6 percent, to $32.18 a barrel in London.

Wholesale gasoline fell 7.2 cents, or 6.9 percent, to 97.1 cents a gallon. Heating oil fell 4.2 cents, or 4 percent, to $1.027 a gallon. Natural gas slid 6.3 cents, or 3.2 percent, to $1.903 per 1,000 cubic feet.

The prices of gold and silver have climbed this year as investors look for safety in a turbulent market. With the stock market bouncing back on Tuesday, the price of gold sank $31.20, or 2.5 percent, to $1,208.20 an ounce, and silver fell 45.6 cents, or 2.9 percent, to $15.334 an ounce. Copper rose 2.2 cents to $2.051 a pound.

The yield on the 10-year Treasury note rose to 1.78 percent from 1.75 percentFriday. The dollar rose to 113.88 yen from 113.26 yen. The euro slipped to $1.114 from $1.126.