Stocks surged on Wednesday with financial issues leading the way, after reports about the government's stress tests suggested that the major banks are better capitalized than some had thought. Also helping, jobs report that suggested the pace of the slowdown is easing.
The DJIA gained 101.63 points to close 8512.28, the S&P500 added 15.73 points to close at 919.53 and the Nasdaq added 4.98 points to close at 1759.10.
Banks stocks led the advance even on reports that companies such as Bank of America and Citigroup will need to raise billions more to meet the requirements of the regulators conducting so called stress tests.
After the close, Cisco Systems reported quarterly sales and earnings that fell from a year ago but still topped estimates.
Investors were sorting through published reports on the health of the nation’s banking system ahead of the government's official release of the stress test results today. The government is testing to see that the 19 biggest banks have enough money on hand to withstand a potential bigger downturn in the economy. More than half the banks may have to raise additional capital. Bank of America may need to raise an additional $34bn in order to meet the regulators standard. Wells Fargo may need around $15bn. Citigroup may need at least another $10bn. JPMorgan Chase, American Express and Bank of New York Mellon won't need any additional capital according to the reports. All the bank stocks mentioned rallied, along with regional banks. Fifth Third Bancorp added 15.5 percent and was on the Nasdaq's big gainers.
In economic news, a pair of reports released before the open showed that the pace of unemployment is starting to slow. Employers in the private sector pared 491,000 jobs from their payrolls in April, after cutting 708,000 jobs in March. Economists surveyed expected a decline of 645,000. The number of job cuts announced in April decreased for the third month in a row. US employers announced 132,590 cuts in April, the lowest number since October, still 47 percent more than in the same month a year ago. The reports raised bets that Friday’s bigger non farm payrolls report from the government will show a slower pace of job losses too. Employers are expected to have cut 620,000 jobs from their payrolls after cutting 663,000 in March. The unemployment rate is expected to have risen to 8.9 percent from 8.5 percent in March.
General Motors fell ahead of its quarterly report, due out today. The company is expected to post a steep quarterly loss.
Ford Motor said its restructuring is on track and that it has enough money to fund its plan. The company also said it will spend $550m to convert a plant that produced trucks and SUVs into a complex for making fuel efficient and battery powered cars.
Walt Disney issued quarterly results. The company reported weaker earnings that topped estimates on weaker revenue that missed estimates. The shares jumped nearly 12 percent.
Treasury prices rose, lowering the yield on the 10 year note to 3.13 percent from 3.15 percent.
In currency trading, the dollar gained versus the euro and fell against the yen.
US Light crude for June delivery rose $2.50 to settle at $56.34 a barrel on NYMEX.
COMEX gold for June delivery rose $7.20 to settle at $911.50 an ounce.
The Nikkei closed at a 6 month closing higher today, on the back of soaring bank shares as investor worries about the US financial system eased. Mitsubishi UFJ Financial Group surged more than 15 percent and Mizuho Financial Group jumped 12.1 percent, buoyed as well by a brokerage upgrade, while other financial also climbed. A good part of the Nikkei's gains were due to it playing catch up to the rest of Asia after being closed for three days of holidays earlier this week. The Nikkei closed 408.33 points higher at 9385.70, its highest close since November 5, while the TOPIX rose 4.6 percent to 885.93.
Shares of Nintendo fell 0.1 percent after the company forecast a 12 percent profit decline this year, short of market expectations, as it expects a drop in sales of its DS portable player.
Mitsubishi UFJ Financial soared 15.8 percent to Y617, even after the bank warned on Friday that it now expects to have slid to its first annual net loss since it was formed in 2005, hit by losses on its stockholdings.
Mizuho Financial Group added 12.1 percent to Y232, gaining additional upward momentum after JPMorgan raised its rating on the company to neutral from underweight, citing financial countermeasures in Japan's additional economic package and improving psychological factors.
Sumitomo Mitsui Financial Group jumped 12.3 percent to Y3920. The bank said it would buy Citigroup's Japanese broker and key investment banking units for $5.9bn and look to form a financial services powerhouse, though an alliance with Daiwa Securities Group.
Hitachi rose 7.3 percent to Y370 after the company said it would report a bigger than expected net losses for the financial year on tax costs, but it more than tripled its operating profit estimate on solid sales of power and industrial systems.
But Tokyo Electron fell 3 percent to Y4540 after the Nikkei business daily said the shipmaking equipment producer may have an operating loss of about Y65bn this business year, a sharp reversal from a profit estimates for the year ended in March.
UK stocks closed higher on Wednesday to hit their highest closing level in nearly four months, led by banks and commodity stocks and buoyed by slower job losses in the United States. The FTSE 100 closed 59.55 points higher at 4,396.49, after trading as high as 4,437.61 earlier in the session. Better than expected consumer confidence and service sector data in the UK kept investor sentiment positive, shrugging off concerns that Bank of America needs $34bn of capital to withstand a deep economic downturn. Citigroup may need as much as $10 billion, a person familiar with the matter said, following the U.S. bank stress tests.
Standard Chartered soared 9.2 percent, supported by a rating upgrade from Exane BNP Paribas and continuing positive sentiment after it posted record first quarter profits the previous session. HSBC rose 4.2 percent. But Barclays shed 3.4 percent and RBS fell 4.8 percent after UBS cut both lenders to sell. Lloyds dropped 6.5 percent.
Miners were other standout gainers, tracking firmer metal prices. Xstrata, Eurasian Natural Resources, Kazakhmys and Anglo American took on 2 to 4 percent. Antofagasta, however, fell after going ex-dividend.
BP added 1.5 percent and BG Group added 0.5 percent, while Tullow Oil gained 4.2 percent after saying it had made another oil find in Uganda. Royal Dutch Shell fell after trading ex dividend.
Cobham fell 5.1 percent despite saying first quarter trading was in line with company expectations.
Man Group dropped 5.6 percent after Jeffries downgraded the hedge fund group to hold from buy.
Admiral Group, Bunzl, Kingfisher, Whitbread, Morrison Supermarkets and Drax also fell after trading ex dividend.