Standard & Poor’s rally lifts spirits: Morning market insights

The New York Stock Exchange rose overnight as the Standard & Poor’s 500 Index had its biggest two-day rally of 2012. The US market was buoyed as Federal Reserve vice-chairman Janet Yellen and New York Federal Reserve president William Dudley echoed the central bank’s view that interest rates were likely to stay low for the next two years at least. Their comments overshadowed disappointment over a report that showed more Americans than forecast claimed jobless benefits last week.

“We have the ingredients for a better tone to the market,” Keith Wirtz, who oversees $15 billion as chief investment officer for Fifth Third Asset Management in Cincinnati, told Bloomberg. “The bar was set low, we might have a good earnings season and a couple of Fed officials are providing some rhetoric. If there’s an erosion of economic conditions, it’s likely that we’re going to see action by the Fed.”

The S&P500 Index rose 1.38% to 1387.57 overnight.

The Dow Jones Industrial Average was also up 1.41% or 181.19 points to 12986.60.

The NASDAQ Index gained 1.30% or 39.09 points to 3055.55.

Global internet giant Google (GOOG: US) was up 3.46% to $US657.99 after it released its earnings overnight. It reported revenues of $US10.65 billion for the quarter ending March 31 – an increase of 24% on the first quarter of 2011.

“Google had another great quarter with revenues up 24% year on year,” Larry Page, the CEO of Google, said. “We also saw tremendous momentum from the big bets we’ve made in products like Android, Chrome and YouTube. We are still at the very early stages of what technology can do to improve people’s lives and we have enormous opportunities ahead. It is a very exciting time to be at Google.”

West Texas Intermediate (WTI) oil was up 0.26% to $US101.28 a barrel overnight.

Gold was down 0.25% to be trading at $US1676.40 an ounce as risk receded.

The Australian dollar was slightly up as global risk receded, buying $US1.04385 at 8.15am AEST.

Europe

European share markets moved up overnight after International Monetary Fund managing director Christine Lagarde opted to reduce her request for $US600 billion ($AU575 billion) of additional funds from member countries, as threats to the global economy diminished.

“Some of the dramas that were envisaged at the end of 2011 or very beginning of 2012 not only have not materialised,” Lagarde said in Washington overnight.

Europe’s slow handling of its debt crisis has hampered Lagarde’s attempts to increase the fund’s size as countries such as Brazil, China and Canada want concrete European efforts to stem the turmoil before they pitch in.

“What Spain has done is laudable,” Lagarde said, while warning government cuts to the budget needed to be “over the right amount of time so that it does not strangle growth”.

The IMF is contributing to bailouts of Greece, Portugal and Ireland. It currently has about $AU365.4 billion available to lend if Spain’s economy does not recover.  The IMF will need more money if it is to bail out Spain, which is bigger than Greece, Portugal and Ireland combined.

The London FTSE 100 closed up overnight 1.34% to 5710.46. The German DAX was up 1.03%, or 68.51 points, to 6743.24. The European Stoxx50 index was up 0.46% to 2352.24.