By Jonathan Cheng
U.S. stocks saw a strong rally cut in half as investors braced
for new risks in Europe and prepared for televised remarks by
Federal Reserve Chairman Ben Bernanke.
The Dow Jones Industrial Average gained 119 points, or 1%, to
11777 in afternoon trading. The Standard & Poor's 500-stock
index added 12 points, or 1%, to 1230 while the Nasdaq Composite
rose 13 points, or 0.5%, to 2620.
The blue-chip Dow had gained as much as 219 points before paring
back the gains in the afternoon. Even after pulling back, all 10
S&P 500 sectors remained in positive territory. The
heavily-battered financial sector led the day's gains. Bank of
America rose 3.5%, while American Express advanced 2.2% and J.P.
Morgan Chase rose 1.8%.
Wednesday's afternoon declines came after headlines suggested
the European Union and International Monetary Fund could withhold
further bailout money to Greece until a referendum is held. On
Monday and Tuesday, the Dow had tumbled 573 points after Greek
Prime Minister George Papandreou called for a referendum on the
terms over a debt bailout for the troubled nation.
"This is the market in a nutshell--you walk away for two minutes
and the market can move dramatically," said Michael Marrale, head
of U.S. sales trading at RBC Capital Markets. "Days like Monday and
Tuesday are certainly not confidence-inspiring, but at this point,
it goes with the territory. Increased volatility is the new
normal."
"Greece has really thrown us for a loop. We don't need extra
uncertainty; there's enough out there as it is," said Tom Villalta,
lead portfolio manager at the Jones/Villalta Opportunity Fund. Even
so, Mr. Villalta called the pullback "one in a number of buying
opportunities." "We believe that U.S. stocks are not decoupled from
Europe's problems, but that the share-price declines aren't
representative of what the overall impact is going to be."
Meantime, the Fed, in its policy-setting meeting Wednesday, kept
interest rates unchanged and appeared to show little movement
toward further monetary easing, which some in the markets had
expected. Even so, investors were awaiting comments from Mr.
Bernanke, slated to begin at 2:15 p.m. EDT.
Mr. Marrale of RBC said that investors had relatively limited
expectations for more easing from the Fed, and instead found the
central bank in a surprisingly positive state of mind. "The Fed's
commentary reads well--they're more optimistic on their outlook for
the economy," he said.
Stocks were also helped by U.S. private-sector hiring, which
came in slightly stronger than expected. Strong earnings reports
were also in the mix, boosting energy and materials stocks after
positive signals from EOG Resources and Pioneer Natural Resources.
Alcoa gained 2.1%, Chevron rose 1.4% and Exxon Mobil climbed
1.1%.
"Between yesterday's rumor rout and today's rumor rally, I think
there's fundamental support below the markets. Earnings are like a
warm blanket right now for the hyperventilating market," said David
Waddell, president and chief investment strategist at Waddell &
Associates in Memphis, Tenn.
On Thursday, investors will hear from the European Central
Bank's new president, Mario Draghi, and will keep a close eye on a
meeting of the Group of 20 industrial and developing economies in
Cannes, which Greek Prime Minister Papandreou is expected to
attend.
In overseas markets, European stocks pushed higher in volatile
trading, with the Stoxx Europe 600 rising 0.9%. Germany's DAX index
gained 2.3% and France's CAC-40 index advanced 1.4%. Asian bourses
erased early losses to trade mostly higher. China's Shanghai
Composite closing up 1.4% after being down 1.5% at its weakest
point, while Hong Kong's Hang Seng Index gained 1.9%. But Japan's
Nikkei Stock Average fell 2.2%.
In economic news, Automatic Data Processing said the U.S. added
110,000 new private-sector jobs in October, a touch above
expectations for 100,000 new jobs. The September number was revised
upward to 116,000, bringing some cheer to the market ahead of
Friday's closely watched monthly nonfarm payrolls report.
Gold futures rose to about $1,730 an ounce, and crude-oil
futures reversed morning gains to slip to just above $92 a barrel.
The U.S. dollar lost ground against the euro and the yen. Treasurys
fell, pushing the yield on the benchmark 10-year note up to
2.0117%.
In corporate headlines, MasterCard surged 6.4%, putting its
share price on track for a new record close, after the card company
reported a 38% jump in third-quarter profit as spending and
transactions made with its credit and debit cards increased. The
company also posted a 27% increase in net revenue, which it derives
primarily from processing transactions for banks.
EOG Resources jumped 11% after its production of more-lucrative
liquid fuels continued to surge. Pioneer Natural Resources gained
9.1% after third-quarter earnings more than tripled amid a
bigger-than-expected revenue gain.
JDS Uniphase climbed 6.9% after reporting better-than-expected
fiscal first-quarter earnings and revenue, offsetting a lowered
current-quarter revenue outlook because of the flooding in
Thailand.
Garmin rallied 4% after the satellite-navigation company
reported better-than-expected third-quarter results and provided an
upbeat outlook for the full year.
Comcast added 0.5% as the cable company slowed defections in
pay-TV subscribers for the fourth straight quarter.
Time Warner shed 2.1% after third-quarter earnings and revenue
topped forecasts. The media giant lifted its view on earnings
growth for this year.
Diamond Foods slumped 21% after the company said the closing of
its $1.5 billion purchase of Procter & Gamble's Pringles
business will be delayed until the first half of 2012.
MF Global, which filed for bankruptcy protection on Monday,
dropped 83% in heavy trading after its trading suspension was
lifted.