Financial, health care stocks lead market higher

[June 18, 2009]  NEW YORK (AP) -- Investors piled back into shares of financial and health care companies, pushing the stock market higher after three days of declines.

Shares of major banks rose Thursday as Treasury Secretary Timothy Geithner appeared before a Congressional panel defending the regulatory overhaul announced the day before by President Barack Obama. Geithner said he's seen evidence of healing in the financial sector.

Several positive reports on the economy encouraged investors after a sell-off in stocks earlier this week that dragged the benchmark Standard & Poor's 500 index down 3.8 percent.

A private sector group said its forecast of economic activity rose more than expected in May, marking a second straight month of gains after seven months of declines.

Earlier Thursday, the government said the overall number of people drawing unemployment benefits fell for the first time since early January. The drop broke a string of 21 straight increases.

Analysts said the reports helped ease some of investors' recent fears that the economy's recovery may be more subdued than originally hoped, and that the stock market's 40 percent move off of 12-year lows since early March was overdone.

At early afternoon trading, the Dow Jones industrials rose 69.84, or 0.8 percent, to 8,567.02. The S&P 500 index rose 7.97, or 0.9 percent, to 918.68, while the Nasdaq composite index slipped less than 1 point to 1,807.69.

Traders this week are also watching for increased volatility ahead of Friday's quarterly "quadruple witching" day, which marks the simultaneous expiration of a number of different options contracts. Analysts say stocks are more likely to push higher during the expirations, which often bring heavy and fractious trading.

After modest gains last week, fell sharply in the first part of this week. Traders have been saying a pullback was likely after such a sharp gain in recent weeks.

"I don't think that this rally is sustainable," said Scott Armiger, portfolio manager at Christiana Bank & Trust. "I still think we have to give up a little bit more."

Still, Thursday's gains are evidence that the market hasn't lost its upward momentum. With trading light as the summer slowdown begins, analysts say more volume is needed in order to move the market significantly in any one direction.

Among financial stocks, JPMorgan Chase & Co. added $1.02, or 3.1 percent, to $33.75, while Goldman Sachs Group Inc. gained $2.82, or 2 percent, to $142.55.

Geithner's comments appeared to ease anxiety about the impact of the government's regulatory changes, which have been a point of worry for investors in financial shares.

"I think the investing public likes the fact that there's going to be more regulation in some areas where it was lacking," said Joe Keetle, senior wealth manager at Dawson Wealth Management.

Speaking before the Senate Banking Committee, Geithner said the Federal Reserve is best suited to become a super-regulator that would oversee large financial firms whose failure could topple the economy.

Geithner's comments came just a day after 10 of the country's largest banks, including JPMorgan Chase and Goldman Sachs, repaid $68 billion in government rescue loans they received under the Troubled Asset Relief Program, or TARP.

Among the day's economic reports, the Conference Board said its index of leading economic indicators, designed to forecast activity in the next three to six months, rose 1.2 percent, well above the 0.9 percent increase forecast by economists surveyed by Thomson Reuters.

Meanwhile, the Labor Department reported that total unemployment insurance rolls fell last week by 148,000 to 6.69 million -- the largest drop in more than seven years. However, new claims edged up.

Bonds sold off following the economic reports, pushing the yield on the benchmark 10-year Treasury note up to 3.78 percent from 3.69 percent late Wednesday.

Rising yields -- which are closely tied to interest rates on mortgages and other consumer loans -- have become a concern for investors since a prolonged spike could choke off borrowing activity and threaten an economic recovery.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude rose 8 cents to $71.11 per barrel on the New York Mercantile Exchange.

In other trading, the Russell 2000 index of smaller companies rose 1.67, or 0.3 percent, to 508.70.

Advancing shares outnumbered decliners by about 3 to 2 the New York Stock Exchange where volume came to a light 441.9 million shares, down from about 626.3 million shares at the same time on Wednesday.

Overseas, Japan's Nikkei stock average fell 1.4 percent. In afternoon trading, Britain's FTSE 100 rose 0.1 percent, Germany's DAX index rose 0.8 percent, and France's CAC-40 rose 1.0 percent.

[Associated Press; By TIM PARADIS]

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