- The Washington Times - Wednesday, April 1, 2009

NEW YORK (AP) - Wall Street began the second quarter on solid footing Wednesday as better-than-expected economic reports helped the market extend a four-week rally.

After falling in the early going on disappointing jobs data, the Dow Jones industrials added about 150 points by midafternoon following reports showing a rebound in pending home sales and improving manufacturing activity. Other major indexes rose more than 1.5 percent.

Financial stocks led the market higher, followed by big gains in the technology and energy sectors. As sentiment about the economy improves, investors have been buying up industries they believe are likely to lead the country out of recession.

The Dow charged ahead in March, rising 16 percent off of 12-year lows hit early in the month, but its movements over the first three months of the year have been one of the most tumultuous on record. Only three other times in the Dow’s history has it experienced 20 percent swings in both directions in one quarter.

Better economic data and an improving outlook on U.S. banks in recent weeks has fueled optimism that the recession could end this year. But there are still a number of analysts who warn against calling a bottom to the market too soon.

Volatility is expected to continue as investors try to gauge where the economy goes from here.

“People seem to swing from one side to the other of ‘the recovery has started’ to ‘the world is ending again,’” said Bill Stone, chief investment strategist at PNC Wealth Management.

In midafternoon trading, the Dow jumped 147.66, or 1.9 percent, to 7,756.58.

The Standard & Poor’s 500 index rose 12.58, or 1.6 percent, to 810.45 The technology-heavy Nasdaq composite index gained 20.43, or 1.3 percent, to 1,549.02.

The Russell 2000 index of smaller companies rose 5.12, or 1.2 percent, to 427.87.

Advancing issues outnumbered decliners by nearly 3 to 1 on the New York Stock Exchange, where volume came to 730.3 million shares.

On Wednesday, more positive economic data helped feed the rally.

Pending home sales rebounded in February from a record low, the National Association of Realtors reported, while the Institute for Supply Management’s index of manufacturing activity contracted in March but by a bit less than anticipated.

Construction spending dropped in February for the fifth straight month, but at a slower pace than in January.

Not all of the reports came as a relief though. The ADP National Employment Report said private sector employment dropped by 742,000 in March. The figure was higher than anticipated, and a rattling sign ahead of the Labor Department’s Friday report on nationwide job cuts last month.

The market’s advance came as the world’s finance ministers gathered in London to discuss the slumping global economy. Speculation has risen in recent days that the various countries in the Group of 20 are disagreeing about how to handle the global financial crisis. Amid the backdrop of thousands of protesters, British Prime Minister Gordon Brown said Wednesday that the G20 was close to agreeing on global reforms for the financial system.

This week so far has been volatile, with the Dow Jones industrials gaining 87 points on Tuesday after plunging Monday by 254 points on President Barack Obama’s rejection of General Motors Corp. and Chrysler LLC.’s restructuring plans.

Analysts expect that theme to continue in the coming weeks as the uncertainty of first quarter earnings reports overhangs the market.

“We’re in a wait-and-see mode for earnings,” said Brian Bush, director of equity research at Stephens Inc. “And not just what the earnings were for the first quarter, but what the earnings outlook will be for the rest of the year.”

Analysts largely expect the reports to be negative, but with the bar already set so low, it’s possible the market could move higher if the reports meet or exceed expectations.

At the same time, Bush said the next couple of weeks could see companies prerelease earnings because they are worse-than-expected.

Among the big gainers in the banking industry, Citigroup Inc. added 12 cents, or 4.7 percent, to $2.65, while JPMorgan Chase & Co. gained $1.12, or 4.2 percent, to $27.70.

Technology stocks that rose included Microsoft Corp., which jumped 77 cents, or 4.2 percent, to $19.14, and Apple Inc., which rose $2.70, or 2.6 percent, to $107.82.

Bond prices were little changed Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 2.66 percent from 2.67 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, was up slightly to 0.21 percent from 0.20 percent Tuesday.

Crude oil fell $1.81 to $47.85 a barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies. Gold prices rose.

Overseas, Japan’s Nikkei stock average rose 2.99 percent. Britain’s FTSE 100 rose 0.8 percent, Germany’s DAX index rose 1.1 percent, and France’s CAC-40 rose 1.2 percent.

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