US stocks rally on Fed chief pick, profits and oil Mon Oct 24, 2005 06:05 PM ET (Updates close with more on Bernanke, bank takeovers and Texas Instruments after the bell) By Caroline Valetkevitch
NEW YORK, Oct 24 (Reuters) - U.S. stocks jumped on Monday in a relief rally that lifted the Dow and S&P 500 to their biggest one-day point gains in six months, after the president nominated White House economic adviser Ben Bernanke to succeed Alan Greenspan as the Federal Reserve chairman. Investor sentiment got a boost from better-than-expected earnings, a drop in oil prices as Hurricane Wilma bypassed oil and gas platforms in the U.S. Gulf of Mexico, and speculation about bank takeovers. Shares of American Express Co. (AXP.N: Quote, Profile, Research) climbed 5.1 percent to $49.54 on the New York Stock Exchange and gave the biggest boost to the blue-chip Dow average after the financial services provider reported better-than-expected earnings. [ID:nN24245611] The financial services sector was the Dow's top performer and among the best in the S&P 500. President George W. Bush announced the nomination of Bernanke, who was a Fed governor until he became a top White House adviser last June, around 1 p.m. EDT. [ID:nN24214593] But the president's choice of Bernanke for Fed chairman was widely reported ahead of the announcement and the market quickly shot higher on the news. "Any time you remove uncertainty, it's good news for the market," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. The Dow Jones industrial average rose 169.78 points, or 1.66 percent, to end at 10,385.00. The Standard & Poor's 500 Index gained 19.79 points, or 1.68 percent, to finish at 1,199.38. The technology-laced Nasdaq Composite Index climbed 33.62 points, or 1.61 percent, to close at 2,115.83. After the closing bell, shares of Texas Instruments Inc. (TXN.N: Quote, Profile, Research) lost 3.4 percent to $29.87 on the Inet system after investors were disappointed by its fourth-quarter revenue forecast. Texas Instruments, the world's top maker of chips used in mobile phones, reported higher earnings and revenue. BERNANKE CITES 'CONTINUITY' Bernanke, 51, said following the nomination that, if confirmed, his "first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years." Greenspan, 79, is set to step down on Jan. 31 after more than 18 years at the Fed's helm. A Fed governor from 2002 until June 2005, Bernanke had been seen as the front-runner for the top Fed position. He is a long-time advocate of inflation targets, which would require the Fed to take certain actions if inflation reached some predetermined level. [ID:nN24214593] The benchmark 10-year U.S. Treasury note fell 15/32 to a price of 98- 14/32, pushing its yield up to 4.45 percent from 4.38 percent late on Friday. BANK AND ENERGY STOCKS CLIMB The Philadelphia KBW Bank Index , which includes the stocks of some of the largest U.S. banks, rose 1.5 percent. Some of the buying interest was tied to speculation over possible takeovers in the sector, said John O'Brien, head of sales trading at KeyBanc Capital. Sovereign Bancorp Inc. (SOV.N: Quote, Profile, Research) said on Monday it will acquire Brooklyn-based Independence Community Bank Corp. (ICBC.O: Quote, Profile, Research) for about $3.6 billion. Sovereign also said that Spain's Santander (SAN.MC: Quote, Profile, Research) will become Sovereign's biggest shareholder by buying 90 million shares. [ID:nWEN1933] That transaction whetted investors' appetite for the shares of other northeastern U.S. banks, such as Astoria Financial Corp., which rose nearly 8 percent to $28.49. [ID:nN24128025] U.S. crude futures (CLZ5: Quote, Profile, Research) for December delivery slipped 31 cents to end at $60.32 a barrel as Hurricane Wilma missed crucial oil and gas facilities in the U.S. Gulf, but lashed southern Florida as a Category 3 storm. "As we see energy prices come down off their extremes, that's going to lend fuel to the fire of the market and also take away the impetus for the Fed to raise rates," said Tom Schrader, managing director of U.S. equity trading at Legg Mason Wood Walker in Baltimore. The Fed has raised interest rates 11 straight times since June 30, 2004, to curb inflation. Higher interest rates are viewed as negative for stocks because they increase borrowing costs for consumers and companies. Energy shares like Exxon Mobil Corp. (XOM.N: Quote, Profile, Research) rose as the storm bypassed the oil and gas platforms in the Gulf. Exxon Mobil gained 2.7 percent, or $1.48, to $56.85 on the NYSE. In other earnings news, shares of drugmaker Merck & Co. (MRK.N: Quote, Profile, Research) gained 3.1 percent, or 82 cents, to $27 on the NYSE after it posted a 7 percent rise in quarterly earnings. On the Nasdaq, shares of Taser International Inc. (TASR.O: Quote, Profile, Research) surged 19.4 percent, or $1.06, to $6.52 after brokerage Jefferies & Co. raised its investment rating on the stock. [ID:nN2436155] Trading was heavy on the NYSE, with 1.65 billion shares changing hands, well above the 1.46 billion daily average for last year. About 1.60 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year. The number of advancing stocks outnumbered those declining by a ratio of slightly more than 3 to 1 on the NYSE. On Nasdaq, advancers beat decliners by about 3 to 1. © Reuters 2005. All Rights Reserved. ------------------------ Yahoo! Groups Sponsor --------------------~--> Try Online Currency Trading with GFT. Free 50K Demo. Trade 24 Hours. Commission-Free. http://us.click.yahoo.com/RvFikB/9M2KAA/U1CZAA/zMEolB/TM --------------------------------------------------------------------~-> Yahoo! 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