Banks Lead A Rally After Getting Cleared To Raise Dividends

NEW YORK (AP) — U.S. stock indexes rose on Thursday, led by gains in financial companies after a number of banks got approval from the Federal Reserve to raise dividends and buy back shares. The dollar weakened against the euro for the first time in nine days.

 

KEEPING SCORE: The Standard & Poor's 500 index climbed 18 points, or 0.9 percent, to 2,058 as of 12:21 p.m. Eastern time. The Dow Jones industrial average jumped 184 points, or 1 percent, to 17,819. The Nasdaq composite gained 24 points, or 0.5 percent, to 4,874.

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U.S. JITTERS: U.S. stocks have slumped in March on speculation that the Fed could raise its benchmark interest rate as soon as June. The central bank has held that rate close to zero since 2008 to help the economy recover from the financial crisis and deep recession that followed. The low rates have helped stocks rally to record levels.

 

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SLUGGISH SALES: Retail sales remain sluggish despite a big drop in gas prices last year. U.S. retail sales fell in February, as auto purchases dropped by the most in more than a year and Americans spent less at restaurants and home improvement stores. Retail sales fell 0.6 percent last month after a 0.8 percent decline in January, the Commerce Department said Thursday. It was the third straight retreat.

 

EUROPE'S DAY: In Europe, Germany's DAX fell 0.1 percent while the CAC-40 in France lost 0.2 percent. Britain's FTSE 100 rose 0.8 percent.

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NO STRESS: Financial stocks were among the biggest gainers after the Fed approved plans by major U.S. banks to raise dividends and buy back shares. The announcements follow the Fed's "stress tests" that assess whether lenders have adequate reserves to withstand a major economic downturn.

         Citigroup rose $1.43, or 2.7 percent, to $53.76 after it said late Wednesday that it would buy back $7.8 billion in stock and raise its quarterly dividend to 5 cents from 1 cent. Morgan Stanley gained $1.54, or 4.4 percent, to $36.49 after announcing a $3.1 billion stock buyback and raising its dividend to 15 cents from 10 cents.

 

CURRENCIES: While the Fed appears to be edging closer to raising rates, the European Central Bank and the Bank of Japan are still trying to stimulate their economies. The divergent policies are pushing the dollar higher against the euro and Japanese yen. While the higher dollar is good news for U.S. consumers vacationing in Europe, it acts as a drag on profits for global companies that rely on overseas sales for a large portion of their revenue.

         The euro recovered some ground Thursday, trading 0.5 percent higher at $1.0617. The dollar fell to 121.24 yen.

 

THE QUOTE: "It's the pullback in the dollar that's cheering investors," said Peter Cardillo, chief market economist. "The frenzy that we saw in the foreign exchange markets has, at least for today, calmed down."

 

WEAK GUIDANCE: Intel lowered its first-quarter revenue forecast, partly because of softer-than-expected demand for desktop PCs used by businesses. That dented demand for its chips. Increasingly difficult economic and currency conditions, particularly in Europe, are also hurting it. Intel's stock dropped $1.31, or 4.1 percent, to $31.02.

 

BONDS: U.S. government bond prices rose. The yield on the benchmark 10-year Treasury note fell to 2.08 percent from 2.11 percent late Wednesday.

 

ENERGY: The price of benchmark U.S. crude oil slipped 68 cents to $47.48 a barrel in New York. Brent crude, a benchmark for international oils used by many U.S. refineries, rose 27 cents to $58.12 a barrel in London.

         – by AP Reporter Steve Rothwell

 

 

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