Stocks advanced for a second straight day on Wednesday as a broad measure of economic growth was revised down, easing investors’ concerns that the Federal Reserve would begin to withdraw its stimulus early.
In afternoon trading the Standard Poor’s 500-stock index and the Dow Jones industrial average were both 1 percent higher, and the Nasdaq composite was 0.9 percent higher.
The Commerce Department reported that United States economic growth was more tepid than previously estimated in the first quarter, held back by a moderate pace of consumer spending, weak business investment and declining exports. The report provided reassurance to investors fearful that the Fed is about to give up on its stimulus.
The effect of the GDP report “is that despite all the rhetoric and fear about tapering, this will keep the Fed firmly planted in stimulus, which is a positive for the market,” said Michael Mullaney, chief investment officer at Fiduciary Trust Co. in Boston.
Global stocks and bonds had a second day of strong gains, as healthy data out of the United States, moves by China to calm bank fears and supportive signs from Europe’s central banks extended the rebound from last week’s global sell-off.
All combined to soothe nerves about plans for a reduction in Federal Reserve stimulus and recent worries about a credit squeeze in China, after a day of sustained buying in European and Asian markets.
Gold and silver, however, both slumped to near three-year lows. Gold fell over 2 percent to $1,230 an ounce and silver dropped 4 percent to leave both at their lowest levels since September 2010 and gold facing its biggest quarterly drop on record. After almost nine years of near unbroken gains, signs that the worst of the global financial turmoil may be over and that central banks might begin reducing stimulus, has sparked a major shift in investor attitude toward bullion.
Bond markets in Europe and benchmark United States Treasuries also continued to claw back ground, although investors remained wary the rebound could give way with markets likely to need more time to acclimatize to new environment.
“At this point in time, having seen an incredibly violent sell-off in the Treasury markets that took everything with it, there is a certain amount of settling back going on,” said Kit Juckes, a market strategist at Société Générale in London.
“I’m not sure we are done with position adjustment yet, though,” he added. “So I wouldn’t declare this as anything more than things are looking a little bit quieter.”
Data on Tuesday showed United States consumer confidence jumped in June to its highest level in more than five years, supporting the view that the Fed will press ahead with plans to reduce its $85 billion a month support program later this year.
Mario Draghi, the president of the European Central Bank, reiterated that the bank remained ready to cut rates again if needed, adding that he and his colleagues would look “with great attention to the potential volatility consequences.”
Mr. Draghi’s comments helped pushed the euro to a three-week low of $1.3035 against a broadly stronger dollar and helped trim yields on the bonds of peripheral euro zone economies which have jumped by more than half a percent over recent weeks.
Article source: http://www.nytimes.com/2013/06/27/business/daily-stock-market-activity.html?partner=rss&emc=rss