U.S. Stocks Extend Rally On Fed Bond-Buying Program
09/14/2012| 10:12am US/Eastern
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--U.S. stocks rise, extending Thursday's Fed rally
--U.S. retail sales and consumer prices are in line with projections
--Overseas markets rally on Thursday's Fed news
By Matt Jarzemsky and Tomi Kilgore
NEW YORK--U.S. stocks rose, led by sectors tied to global economic growth, as the previous session's Fed-induced rally extended to a second day.
The Dow Jones Industrial Average gained 65 points, or 0.5%, to 13605 shortly after the opening bell. The Dow jumped 206.51 points, or 1.6%, on Thursday to record the fifth multiyear closing high in the past six sessions after the Federal Reserve announced additional economic stimulus, which included an open-ended program to buy mortgage-backed securities.
Standard & Poor's 500-stock index advanced seven points, or 0.5%, to 1467. Energy and materials shares in the index rose the most while defensive sectors, such as telecommunications and consumer staples, lagged behind. The Nasdaq Composite Index rose 21 points, or 0.7%, to 3176.
"Hedge fund managers and other investors have not been fully invested in equities this year," said John Brady, managing director of global futures at R.J. O'Brien. "The Fed has provided additional stimulus, risk assets are rising, and now there's going to be a catch-up trade."
Retail sales for August rose 0.9% on the month, matching the median estimate of economists in a Dow Jones Newswires poll. Excluding auto sales, retail sales rose 0.8%, just shy of forecasts.
The Consumer Price Index for August increased 0.6%, which matched forecasts but was the largest one-month increase in the measure of inflation since June 2009. Soaring gasoline prices accounted for most of the gain. Core CPI, which excludes food and energy, rose 0.1% versus a 0.2% estimate.
U.S. industrial production fell 1.2% in August, according to a Federal Reserve report, more than the 0.3% drop economists expected. Capacity utilization dropped to 78.2% last month from a downwardly revised 79.2% in July, also a bigger-than-forecast decline.
A preliminary reading of the Reuters/Univ. of Michigan consumer sentiment index for September due out at 9:55 a.m. EDT is expected to slip to 74 from last month's 74.3, and July business inventories out at 10 a.m. is expected to rise 0.4%.
European markets were broadly higher as overseas investors cheered the Fed's new stimulus measures, unveiled after Europe's Thursday close. The Stoxx Europe 600 climbed 1.1% and was on track to close at a 14-month high.
Also boosting sentiment, second-quarter employment in the euro zone held steady from the first quarter, the first time in a year that employment didn't decline.
Asian markets also rallied on the back of the Fed action. China's Shanghai Composite rose 0.6% and Japan's Nikkei Stock Average advanced 1.8%. South Korea's Kospi Composite rose 2.9% after Standard & Poor's raised the country's credit rating, citing reduced geopolitical risks on the Korean peninsula.
Crude oil futures surged 1.4% to $99.66 a barrel, buoyed by concerns over violence in the Middle East, while gold futures ticked up 0.2% to $1,775.10 an ounce. The dollar dropped against the euro to five-month lows, but rose against the yen.
In corporate news, shares of Apple gained 1.2% as the initial inventory of the new iPhone 5 appeared to sell out just an hour after the company began accepting preorders.
Analogic surged 11% after the company reported better-than-expected fiscal fourth-quarter earnings and revenue, boosted by strength in ultrasound and security technology sales, and provided an upbeat outlook for 2013.
Werner Enterprises slumped 7.1% after the trucking company provided a third-quarter earnings outlook that was below current analyst projections as costs have been increasing faster than revenue per mile.
Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com
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