Stocks powered their way up on Friday as easing debt worries in Europe and Caterpillar’s strong sales report gave investors a reason to bid shares higher. Energy stocks led the advance, helping the Dow average record its biggest two-week gain since November.
The Dow industrials ended the week on a solid footing, with gains of 240 points, or 2.3%. The blue-chip measure recorded second successive weekly gain of more than 2%. During the week, the widely followed S&P 500 index added 2.4% and the tech-laden Nasdaq advanced 3%.
A well received auction of Spanish bonds added to the market’s cheer with news of stress-tests on European banks tempering fears of a financial crisis in the region. Nevertheless, investors remained cautious and kept the luster of safe-haven instruments such as US treasuries and gold intact. Gold prices hit an intraday high of $1263.70 before losing some ground to settle at $1258.30 per ounce.
This morning, global markets cheered reports of China’s decision to allow the yuan to appreciate against the US dollar. The decision could have widespread political and economic ramifications, with the move likely to aid U.S. manufacturers and exporters. The report, while reducing fears of further tightening moves, sent risk sentiments soaring in the region this morning, with the Shanghai Composite up 2.9%, the Nikkei up 2.4% and the Hang Seng up 3.1%. The industrial metals complex jumped on the news, reflecting China’s position as the world’s largest purchaser of dollar-denominated raw materials. Copper prices rallied 3.6%.
The news has sent U.S. stock futures sharply higher, with the Dow Jones industrial average up 109 points, or 1.1%, to 10,482. Standard & Poor’s 500 index futures added 13.60 points, or 1.2%, to 1,123.80, while Nasdaq 100 index futures rose 22.00 points, or 1.2%, to 1,931.50, ahead of the opening bell.
Key to market sentiment this week would be the FOMC policy meet. While expectations are key interest rates would be kept at the near-zero level, it would be interesting to see the Fed’s take on the economy, given the recent weaker-than-expected retail sales data, lingering weakness on the housing front and an unexpected jump in weekly jobless filings.
Markets will also look to the reception of the week’s $108 billion of new government debt. The Treasury is scheduled to auction $40 billion in 2-years on Tuesday, $38 billion in 5-years Wednesday and $30 billion 7-years Thursday.
