Better-than-expected reports on housing and consumer confidence helped U.S. stocks record gains albeit in a tepid manner. Fed Chairman Ben Bernanke’s reappointment also added to the positive sentiments but the muted gains signaled investors were progressing with caution. Treasury prices rose after a successful auction of $42 billion two-year notes.
The Dow Jones industrial average added 30 points, or 0.3% and closed at its highest point since November 4. The S&P 500 index gained 2 points, or 0.2% to close at its highest level since November 6. The NASDAQ composite rose 6 points, or 0.3%, to 2024, its highest close since October 1. NYSE volume remained a modest 1.14 billion shares, with advancing issues ahead of decliners by a three-to-two margin.
After touching their 10-month high, crude prices retreated 3.1% to $72.05, reflecting yesterday’s reported rise in stockpiles from the American Petroleum Institute, generating a 1.4% fall in the S&P’s oil and gas sector. Among DJIA components ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) eased 0.9% and 0.2%, respectively.
A favorable housing report sent shares of Hovnanian (NYSE:HOV) up 6.5%, Pulte Home (NYSE:PHM) up 3.5%, and Lennar (NYSE:LEN) 2.8%. Among home improvement retailers, Lowe’s (NYSE:LOW) shares gained 1.7% after it said it was entering Australian markets in a Woolworth partnership. Home Depot (NYSE:HD) shares rose 2.2%.
Consumer services shares rose 1.2% and were the leading gainers among the S&P 500 industry groups. Shares of retailers advanced with luxury-retailer Saks (NYSE:SKS) up 8.5%, Macy’s (NYSE:M) up 3.5% and Sears Holdings (NASDAQ:SHLD) up 2.4%.
The Treasury sold $42 billion 2-year notes in its planned $109 billion auction for the week. Although, the response was average, with a high yield of 1.119%, Treasury prices rose on improved inflation expectations, with the longer-dated 30-year up 22/32 in price, and its yield down 4 bps to 4.22%. Three-month Libor fell to a record low of 0.38%, its lowest level since 1986, pointing to increased credit market liquidity.
In what could be a major policy matter, the government expects US debt over the next decade to almost double, as a less-vigorous-than-hoped-for economic recovery fails to offset increased spending on retirement and health care benefits. The White House expects a $9 trillion deficit over the next decade, $2 trillion more than previously anticipated, with a 2009 deficit of $1.58 trillion.
