Feb. 6 (Bloomberg) -- U.S. stocks gained, sending the Dow Jones Industrial Average to its best two-day rally in a month, on speculation the highest unemployment rate since 1992 will force Congress to pass an economic stimulus package.
Bank of America Corp. jumped 27 percent to lead gains in 29 of 30 Dow stocks after saying it doesn’t need more government aid. Citigroup Inc. and JPMorgan Chase & Co. added at least 10.7 percent on speculation a bank rescue to be detailed next week won’t wipe out shareholders. All 10 industry groups in the Standard & Poor’s 500
Index rose as Labor Department data showing the nation lost 598,000 jobs last month bolstered expectations lawmakers will agree on a plan to combat the recession.
The S&P 500 rose 2.7 percent to 868.6. The Dow added 217.52 points, or 2.7 percent, to 8,280.59, capping a 4.1 percent two- day gain. The Nasdaq Composite Index climbed 2.9 percent, erasing its 2009 loss.
Stimulus Vote
The Senate put off a vote on the stimulus package after lawmakers failed to agree on how to cut the more than $900 billion measure. The House has already passed an $819 billion version of the plan. Labor Department data released today showed the unemployment rate climbed to 7.6 percent from 7.2 percent in December as payrolls suffered the biggest monthly decline since December 1974.
‘Thinking Ahead’
“People are thinking ahead to what are these numbers going to look like in June,” Paulsen said. “Main Street is in free- fall, which is where Wall Street was in September and October. Wall Street since mid-October has been flat, and that’s what Main Street might look like by spring or early summer.”
The S&P 500 is likely to end the year at around 1,200, up about 42 percent from yesterday’s close, Paulsen said. Strategists at 11 Wall Street investment banks surveyed by Bloomberg have a median forecast of 1,050.
“The bad numbers are likely to continue for a while, but that doesn’t mean stocks won’t look through them as investors see light at the end of the tunnel,” said Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc., which manages $16 billion in Fairport, New York. The unemployment rate is “a lagging variable,” tending to peak after stocks have begun to rally and trough after the start of bear markets.
The last peak in the unemployment rate, at 6.3 percent in June 2003, came three months after the S&P 500 began its climb to a record 1,565.15 in October 2007.
Financials Jump
Financial companies in the S&P 500 gained 8.1 percent collectively, the biggest advance among 10 industry groups. Investors are awaiting details of Obama’s strategy to aid the nation’s banks. Treasury Secretary Timothy Geithner on Feb. 9 is scheduled to announce a package that’s likely to emphasize guarantees for impaired assets, according to people familiar with the plan.
To contact the reporters on this story: Eric Martin in New York at emartin21@bloomberg.net; Elizabeth Stanton in New York at estanton@bloomberg.net.
Last Updated: February 6, 2009 16:38 EST
(edited by BRIGHT INFO)
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