NEW YORK: Stocks rallied Thursday as investors entertained thoughts of further stimulus from global central banks, and embraced lower borrowing costs in Europe and the assumption that China’s economy is headed for a soft landing.
Sentiment also was bolstered by hope for first-quarter earnings, now that expectations have been lowered.
“I would look at lowered expectations being very easy hurdles to clear for many companies,” said Nick Raich, director of research with Key Private Bank.
“It’s like if I go to a movie, and people say how great it is, I’m always disappointed. But if people say it stunk, I’m pleasantly surprised. So the first quarter is like a crappy movie,” he added.
Marking its sixth triple-digit rise so far for 2012, the Dow Jones industrial average rose 181.1 points, or 1.4 percent, to 12,986.5. Twenty-six of its 30 components rose, including AT&T Inc., up 1.3 percent after JPMorgan Chase upgraded its view of the phone company.
Hewlett-Packard Co. led blue-chip gains, up 7.2 percent, after a study found shipments of personal computers unexpectedly climbed in the first three months of 2012. Researcher Gartner Inc. concluded HP strengthened its stance at the top of the heap in terms of PC shipments, accounting for 17 percent of global shipments in the first quarter.
The S&P 500 index advanced 18.86 points, or 1.4 percent, to 1,387.57, with U.S. Steel Corp. among those rallying. Its shares were up 7.5 percent.
Seventy percent to 75 percent of companies on the S&P 500 will beat expectations for the first quarter, thanks to dramatically lowered estimates, according to Raich.
Expectations for first-quarter earnings growth stood at 13 percent last summer, and have since been lowered to 3 percent. “We actually had 13 percent earnings growth in the fourth quarter, and you just don’t go from 13 percent to 3 percent without a shock, so estimates went too far down,” he said.
The Nasdaq composite index climbed 39.09 points, or 1.3 percent, to 3,055.55.
New York Federal Reserve President William Dudley said the economy is not yet strong enough to make a significant dent in the jobless rate. Janet Yellen, the Fed’s vice chair, said she expects the country will fall “far short in achieving our maximum-employment objective.”
“We’re seemingly in this mode where Europe matters again, and now we’ve gotten a reprieve from worries about Europe with yields coming in,” said Bill Stone of PNC.
