Stocks rallied Wednesday afternoon after the Federal Reserve held interest rates steady, as expected, but issued a slightly more upbeat economic outlook.
After the close, Bank of America said Ken Lewis has been removed as Chairman, but will stay on as CEO and president.
The financial sector gained 3.58%.
Encore Capital Group Inc (ECPG) +43.99% to $8.38. National Financial (NFP) +27.48% to $6.82. Affiliated Managers Group (AMG) +23.57% to $55.21. Calamos Asset Management (CLMS) +18.16% to $10.67. Doral Financial Corp. (DRL) +17.95% to $4.60.
Aetna Inc. (AET) -10.33% to $21.88. Fidelity National (FNF) -5.73% to $18.27. First American Corp. (FAF) -5.15% to $26.35.
The Dow Jones industrial average (INDU) gained 169 points, or 2.1%, closing at the highest point since Feb. 9.
The S&P 500 (SPX) index added 18 points, or 2.2% and ended at the highest point since Jan. 28. The Nasdaq composite (COMP) rose 38 points, or 2.3% and ended at the highest point since Nov. 3, 2008.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than five to one on volume of 1.48 billion shares. On the Nasdaq, advancers topped decliners by over three to one on volume of 2.41 billion shares.
Consumer cyclicals rose 1.75%.
Brunswick Corporation (BC) +17.96% to $5.91. Sturm Ruger & Company (RGR) +16.61% to $12.64. Furniture Brands Intl (FBN) +16.15% to $3.02. Tenneco Inc. (TEN) +15.22% to $2.65. Jones Apparel Group Inc. (JNY) +14.27% to $9.21.
V.F. Corporation (VFC) -13.61% to $58.12. True Religion Apparel (TRLG) -9.11% to $16.36.
Stocks spiked even more in the first half hour after the 2:15 p.m. ET Fed announcement, but lost some steam late in the session.
Investors found positives in the day’s bleak report on first-quarter economic growth, pushing stocks higher at the open. The markets extended those gains after the Fed opted to keep the fed funds rate, a key short-term interest rate, at a historic low near zero.
The capital goods sector rose 2.74%.
Semitool Inc. (SMTL) +24.32% to $4.55.
Tecumseh Products Company (TECUA) +21.09% to $10.85. Brookfield Homes Corp. (BHS) +14.62% to $5.41. Gafisa SA (ADR) (GFA) +14.21% to $17.92. NACCO Industries Inc. (NC) +12.66% to $42.17.
Dresser-Rand Group Inc. (DRC) -7.80% to $24.47.
In its statement, the bank gave a more upbeat take on the economy than it has recently, although the tone remained cautious. The Fed said that “although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time.”
Consumer non-cyclicals were higher by 1.59%.
Medifast Inc. (MED) +24.07% to $7.01. B&G Foods Inc. (BGS) +21.44% to $6.40. Elizabeth Arden Inc. (RDEN) +15.11% to $8.38. Corn Products Intl. Inc. (CPO) +13.36% to $23.08.
USANA Health Sciences (USNA) -7.48% to $25.35. Allion Healthcare Inc. (ALLI) -7.17% to $5.57. Green Mountain Coffee (GMCR) -5.33% to $52.73.
The statement also said the pace of contraction appears to be somewhat slower, a belief that has helped lift stocks over the last two months, said Stephen Stanley, chief economist at RBS Securities.
“It’s not like they were wildly optimistic, but they acknowledged that the data have been a little better, the consumer is stabilizing and that market conditions are improving, ” he said. “They think that the improvement we’ve seen in financial market conditions over the last month is likely to continue.”
The transportation sector gained 3.11%.
Horizon Lines Inc. (HRZ) +15.57% to $4.90. Ultrapetrol (Bahamas) Ltd (ULTR) +12.46% to $3.79. The Greenbrier Companies (GBX) +11.62% to $8.07. Capital Product Partners (CPLP) +11.43% to $8.87. AirTran Holdings Inc. (AAI) +10.28% to $7.08.
Quarterly results are due tomorrow morning from Dow components Exxon Mobil (XOM) and Procter & Gamble (PG).
In a big day for economic news, reports are due on personal income and spending, weekly jobless claims, manufacturing in the Midwest and the first-quarter employment cost index.
Thursday is also the deadline for Chrysler to come up with the necessary concessions to avoid filing for bankruptcy. The company has already made deals with its union and creditors. Late Wednesday, reports said the company reached a deal with Italian automaker Fiat, fulfilling the government’s third requirement for the company to avoid bankruptcy.
The basic materials sector rose 3.18%.
P.H. Glatfelter Company (GLT) +21.54% to $8.86. Buckeye Technologies Inc. (BKI) +20.05% to $4.85. Trex Company Inc. (TWP) +15.06% to $11.61. Innospec Inc. (IOSP) +12.57% to $7.88. Sealed Air Corp. (SEE) +11.05% to $19.50.
Olympic Steel Inc. (ZEUS) -12.32% to $17.43. Cheniere Energy Partners (CQP) -8.92% to $6.89. Omega Flex Inc. (OFLX) -7.03% to $16.27. Quaker Chemical Corp. (KWR) -6.79% to $11.95. Aracruz Celulose SA (ADR) (ARA) -5.05% to $11.66.
Stocks were rising again after two down sessions, recharging the advance that boosted the major gauges all more than 20% over a six-week period. Last week, only the Nasdaq gained, with the Dow and S&P 500 posting small losses.
The service sector was 2.26% higher.
Wyndham Worldwide Corp. (WYN) +35.39% to $11.86. ATC Technology Corp. (ATAC) +28.17% to $16.70. The E.W. Scripps Company (SSP) +27.50% to $2.04. Ameristar Casinos Inc. (ASCA) +20.48% to $18.00. Phase Forward Inc. (PFWD) +19.00% to $14.28.
Alto Palermo S.A. (ADR) (APSA) -13.45% to $5.15. Panera Bread Company (PNRA) -12.01% to $55.37. Barrett Business Services (BBSI) -9.45% to $10.25. Carter’s Inc. (CRI) -9.18% to $21.07. Heidrick & Struggles Intl (HSII) -8.23% to $17.74.
After a period of consolidation on the back of a strong move, stocks are now moving higher, said Michael Church, president at Addison Capital.
“There have been some reports and earnings that were not as bad as expected and that’s helped,” Church said. “At one point, investors were fearing the apocalypse, but it’s become clearer that that’s not what is happening.”
Conglomerates rose 2.88%.
Federal Signal Corp. (FSS) +9.72% to $8.35. Siemens AG (ADR) (SI) +9.16% to $67.94. Tomkins plc (ADR) (TKS) +6.57% to $9.89. Wonder Auto Tech. Inc. (WATG) +5.13% to $6.15.
Fears that major banks may need more cash on hand have been in play this week ahead of the results of Treasury’s “stress tests” of the largest companies, due next Monday.
“I think people are just looking forward to the tests being over,” said Church.
The economy shrank at a faster-than-expected pace in the first quarter, surprising economists who were looking for an even slower pace of contraction after a rough fourth quarter of last year.
Gross domestic product fell at a 6.1% annualized rate in the first quarter after falling 6.3% in the fourth quarter. Economists thought it would fall at 4.7% pace, according to Briefing.com forecasts.
GDP was weighed down by a sharp decline in exports and plummeting business inventories.
However, the inventory slowdown was seen as a positive, as it could mean the correction cycle is ending.
The energy sector gained 2.71%.
Massey Energy Company (MEE) +23.62% to $15.49. Complete Production (CPX) +20.46% to $5.77. Bronco Drilling Co. Inc. (BRNC) +16.24% to $5.94. Newpark Resources Inc. (NR) +16.07% to $3.25. Union Drilling Inc. (UDRL) +15.11% to $6.78.
Cheniere Energy Inc. (LNG) -12.11% to $3.92. Aegean Marine Petroleum (ANW) -10.27% to $15.21.
In addition, personal consumption rose, after falling in the previous quarter, raising hopes that consumer spending will pick up.
In other economic news, home loan applications fell last week to the lowest levels in more than a month due to a drop in refinancing demand.
Wednesday also marked President Obama’s 100th day in office.
Technology was higher by 2.17%.
SAVVIS Inc. (SVVS) +29.06% to $11.59. Mercury Computer Systems (MRCY) +20.48% to $8.06. Ness Technologies Inc. (NSTC) +17.89% to $4.02. Trimble Navigation Ltd. (TRMB) +16.26% to $22.02. CommScope Inc. (CTV) +15.34% to $23.61.
Total System Services (TSS) -11.45% to $12.84. RF Micro Devices Inc. (RFMD) -10.57% to $2.37. Network Equipment Tech (NWK) -8.29% to $3.87. AeroVironment Inc. (AVAV) -7.39% to $22.57.
In the banking sector, Citigroup (C) has reportedly asked Treasury if it can pay out bonuses to certain workers, according to the Wall Street Journal. Citi has received $45 billion in federal bailout money and may need to raise more. Shares gained 8%.
Wells Fargo (WFC), Goldman Sachs (GS), Morgan Stanley (MS) and Fifth Third (FITB) were among the other gainers. The KBW Bank (BKX) sector index rose 5%.
The healthcare sector was higher by 1.32%.
Dendreon Corporation (DNDN) +94.24% to $22.94. Psychiatric Solutions (PSYS) +26.41% to $18.14. Poniard Pharmaceuticals (PARD) +22.76% to $3.04. Synta Pharmaceuticals (SNTA) +20.86% to $3.36. Prestige Brands Hldgs (PBH) +20.25% to $6.77.
BioCryst Pharmaceuticals (BCRX) -10.29% to $3.75. Novavax Inc. (NVAX) -10.06% to $2.86. Sinovac Biotech Ltd. (SVA) -6.72% to $2.50. Endo Pharmaceuticals (ENDP) -5.37% to $17.28.
In corporate news, Aetna (AET) reported higher quarterly sales and earnings that topped estimates. But the health insurer also said it saw higher-than-expected medical costs. Shares slumped 10%.
Time Warner (TWX), the parent of CNNMoney.com, reported weaker quarterly profit on slowing ad sales, but results were better than what analysts were expecting. Shares gained 1%.
Dendreon (DNDN) shares rallied 94% in its first day of trading after saying its experimental treatment for advanced prostate cancer extended the lives of men suffering from the disease by four months. Shares were halted after the Tuesday afternoon announcement.
Utilities were up 1.09%.
Suntech Power Hldgs. Co (STP) +16.43% to $14.24. Atlas America, Inc. (ATLS) +12.53% to $15.18. TransAlta Corp. (USA) (TAC) +10.90% to $17.50. Companhia de Saneamento (SBS) +8.05% to $28.46. Korea Electric Power Corp (KEP) +7.92% to $10.49.
Treasury prices tumbled, raising the yield on the benchmark 10-year note to 3.09% from 3.01% Tuesday. Treasury prices and yields move in opposite directions.
Lending rates were mixed. The 3-month Libor rate fell to 1.04% from 1.05% Monday, according to Bloomberg.com. The overnight Libor rate was unchanged at 0.21%. Libor is a bank-to-bank lending rate.