Stocks Soar on Fed Stimulus Hopes
NEW YORK ( TheStreet) -- The U.S. benchmark indices settled sharply higher Monday as investors clung to the hope of further economic stimulus following Federal Reserve chairman Ben Bernanke's warning about long-term unemployment.
The Dow Jones Industrial Average closed up 160.9 points, or 1.2%, at 13,242. All companies on the index rose except Verizon Communications (VZ) , whose shares fell after Citigroup lowered its earnings estimates on the company. Dow leaders included Pfizer(PFE) , American Express (AXP) and Merck(MRK) .
The S&P 500 gained 19.4 points, or 1.4%, at 1417, on Monday hitting its highest level since 2008. The Nasdaq added 54.7 points, or 1.8%, at 3123, settling above 3100 for the first time since November 2000.
Bernanke said that "continued accommodative policy" is needed to support the economy's recovery.
"If progress in reducing unemployment is too slow, the long-term unemployed will see their skills and labor force attachment atrophy further, possibly converting a cyclical problem into a structural one," he explained.
Stock futures popped following his comments, suggesting that some investors believe further stimulus is on the horizon. However Dan Greenhaus, chief global strategist with BTIG, said that the central bank would be more likely to extend its current Operation Twist program than start a new purchase program.
"The distinction may seem academic to some but to the Chairman, the choice of 'continued
The week is fairly full in terms of economic reports, with investors getting data on the housing market and a look at consumer confidence and personal spending levels later in the week. On Monday, the National Association of Realtors reported that pending home sales fell 0.5% in February, when economists were expecting a rise to 1%, according to Thomson Reuters . However, sales are still solidly higher than a year ago and economists are expecting improvements in buying as the spring season draws near.
Also, the Chicago Federal Reserve reported that its national activity index, which weighs production, income, employment, personal consumption and more, fell to a level of -0.09 in February, from 0.33 in January, which was its highest level since May 2010.
A manufacturing survey from the Dallas Federal Reserve held steady in March, suggesting that growth in Texas factory activity is continuing at the same pace as in February. New orders stagnated but expectations of manufacturers on future business conditions were more optimistic.
Stocks were coming off their worst week of the year, with the S&P 500 and Dow losing 0.5% and 1.2%, respectively, last week. However, the market is still on track to post its best first quarter in 14 years. With one week left to the quarter, the S&P 500 is up 11.1%, the Dow is up 7.1%, and the Nasdaq is up 17.8% year to date.