US stocks rallied on Tuesday as investors looked beyond the Federal Reserve's dour outlook on the economy and instead scooped up shares hit in last year's big selloff. After the close, Alcoa said it will cut at least 13,500 jobs, or 13 percent of the company's worldwide workforce by the end of the year, as a means of cutting costs. Stocks held on to morning gains and then moved higher, even after the release of the minutes from the last Fed policy meeting. In the minutes, the central bankers said gross domestic product growth will decline in 2009, and that even by using non traditional methods to try to help the economy stabilize, the outlook will remain weak for some time. The report also showed that the bankers think unemployment will rise significantly into 2010. The DJIA closed 62.21 points higher at 9015.10, the S&P500 added 7.25 points to close at 934.70 and the Nasdaq added 24.35 points to close at 1652.38.
Technology and financials were among the leaders as investors scooped up some of last year's losers. IBM, Intel, Hewlett Packard and Cisco Systems were the tech sector's big gainers. Citigroup, Bank of America and Morgan Stanley led the financial gains.
In economic news, the number of homes under contract to be sold fell 4 percent in November. The National Society of Realtors said its pending home sales index fell to 82.3 in November, worse than expected and the lowest level since the group began tracking the index in 2001. The government's November factory orders showed activity declined by 4.6 percent after dropping 6 percent in the previous month. Economists thought orders would drop 2.3 percent. On the upside, the services sector of the economy showed some improvement in December, although activity remained weak. The Institute for Supply Management's services sector index rose to 40.6 from 37.3 in November. Economists thought it would slip to 36.5.
Toyota Motor said it will halt production at its Japanese plants for 11 days in February and March in an effort to move inventory. On Monday, Toyota reported a 37 percent year over year drop in December auto sales. Auto sales overall were abysmal, with Ford Motor and General Motors reporting December sales fell over 30 percent from a year ago.
In merger news, Endo Pharmaceuticals said late Monday that it will buy fellow biotech Endevus Pharmaceuticals for $370m, or $4.50 per share.
Treasury prices fell, raising the yield on the 10 year note to 2.52 percent from 2.48 percent. Lending rates were mixed. The 3 month Libor rate slipped to 1.41 percent from 1.42 percent, a 4 1/2 year low. Overnight Libor edged up to 0.13 percent from 0.12 percent.
The dollar gained versus the euro and yen.
US light crude for February delivery fell 23 cents to $48.58 a barrel on NYMEX.
COMEX gold for February delivery rose 70 cents to $859.50 an ounce.
Gasoline prices rose 1.6 cents to a national average of $1.688 a gallon.
The Nikkei average rose 1.7 percent today to hit a two month closing high as exporters such as Honda Motor surged on a softer yen and amid hopes for a US stimulus package to boost the economy. The Nikkei logged its first seven day winning streak in nearly three years, gaining 8.5 percent during the period, including two half days of trading before and after the New Year holiday.
A newspaper report that Japan's government will seek to scrap capital gains taxes for foreigners investing in Japanese companies through funds also helped improve sentiment. The Nikkei average closed 158.40 points higher at 9239.24.
Shares of Japanese regional banks including Bank of Yokohama gained after the Mainichi newspaper said the government is looking at a plan to inject public funds into 40 or more regional banks, whose capital bases are being hurt by rising bad loans amid the financial crisis.
Investors scooped up beaten down sectors such as automakers, amid improving risk appetite after a panic ridden 2008, in which the Nikkei booked its worst year ever with a 42 percent fall. Shares of Honda soared 11 percent to Y2,210, while Toyota Motor jumped 4.9 percent to Y3,200 and Nissan Motor rose 9.7 percent to Y374.
UK stocks rose for the sixth session in a row on Tuesday, with mining stocks leading the way on former metals prices while drugmakers also gained after recent weakness. Xstrata soared 13.4 percent, Vedanta Resources surged 11.3 percent, Rio Tinto added 11.1 percent, Antofagasta jumped 7.9 percent and Eurasian Natural Resources gained 11.2 percent. The FTSE100 closed 59.28 points higher at 4638.92, after gaining 8.6 percent in the previous five sessions.
Pharmaceuticals were stronger following recent weakness. AstraZeneca, GlaxoSmithkline and Shire gained between 2.2 percent 3.5 percent.
Oil producers were weaker, with BP and Royal Dutch Shell down 0.2 to 1 percent.
Johnson Matthey fell 3.8 percent after Citigroup downgraded the stock to hold from buy.
Banks were mostly with the FTSE350 banks index down 1.1 percent. The FSA said late on Monday its ban on short selling financials, imposed last September, would expire on January 16, but stressed it would reintroduce the ban without consultation if needed. HSBC, RBS, and Lloyds TSB were down 2.9 to 5.3 percent. But Standard Chartered, Barclays and HBOS rose 1.4 to 8.2 percent. Bucking the trend in the financial sector, Man Group jumped 17 percent after it said the NAV of its Athena Guaranteed Futures rose almost 25 percent in the past 12 months.
3I topped the FTSE100 gainers list, up more than 21 percent on buying by bargain hunters after concerns over the group's prospects pushed the stock to multi year lows in late 2008.
Next and Debenhams rose 12.5 percent and more than 20 percent respectively despite poor falling sales, as investors were relieved that the slide was not greater. Marks and Spencer rose 3.8 percent ahead of its trading update on Wednesday. The Times reported in its Web site that the retailer was set to cut more than 1000 jobs following disastrous Christmas trading. A spokesman for M&S decline to comment.
However, the outlook for the retail sector remained glum. British consumer morale sank in December as worries about job losses resulting from the downturn intensified, with the Nationwide Building Society saying its confidence gauge fell to its lowest since the survey began in 2004, and Britain's service sector shrank at a near record pace last month.