Stocks rally on ECB's bond-buying plan

The S&P 500 hits a 4-year high and the Dow jumps more than 200 points after the European Central Bank also keeps its key rate unchanged. US jobless claims decline, and private employers hire more workers than expected. The US services sector expands.

By Melly Alazraki Sep 6, 2012 9:24AM
stock market Updated at 12:03 p.m. ET

Stocks rallied Thursday as investors felt bullish after the European Central Bank announced it was leaving rates unchanged and as its president, Mario Draghi, agreed to a new bond-buying program. On the domestic front, a handful of better-than-expected employment reports looked encouraging ahead of Friday's monthly jobs data.

The Dow Jones Industrial Average ($INDU) was up 237 points at 13,285. The S&P 500 ($INX) was up 27 points at 1,430, topping its highest closing level since 2008, Bloomberg reported. The Nasdaq Composite ($COMPX) was up 62 points at 3,131.

European stocks were higher and the euro approached a two-month high against the dollar as the ECB left its benchmark rate at a record low of 0.75%. The Bank of England also left its benchmark rate unchanged at 0.5%.

ECB announces bond-buying plan
The ECB outlined a bond-buying program to lower struggling eurozone countries' borrowing costs, Draghi said. The program, aimed at the secondary market, would also help safeguard the euro.

The program, which the Bundesbank is known to have opposed, would focus on bonds maturing within three years. "We are strictly within our mandate," Draghi said, according to Reuters. Draghi said only one member of the ECB Governing Council had dissented. Eurozone growth data
Second-quarter growth in the in the 17 countries using the euro decreased by 0.2% compared with the previous quarter, according to second estimates released by Eurostat. GDP for the eurozone was 0.5% lower than the same quarter last year.

Strong exports limited the eurozone's economic contraction in the second quarter despite falling investment, inventories and private consumption that point to output shrinking overall in 2012.

US jobs numbers

Fewer Americans than forecast filed for unemployment benefits last week as jobless claims fell to their lowest level in a month, easing concerns that the labor market may weaken in the second half, Bloomberg reported.


Jobless claims decreased by 12,000 to 365,000 in the week ended Sept. 1, the Labor Department reported. Economists had expected jobless claims to drop to 373,000, according to Briefing.com. The four-week average inched up by 250 to 371,250. Claims in the previous week were revised to an increase of 3,000 to 377,000 compared with the initial estimate that they held steady at 374,000.


Payrolls processor Automatic Data Processing showed employers added 201,000 private-sector jobs in August, much more than the expected 143,000, according to Briefing.com. Moreover, the July figure was revised up to 173,000 from the previously reported 163,000.


The ADP report follows one from outplacement firm Challenger, Gray & Christmas that showed more than 32,000 planned job cuts in August, fewer layoffs than were announced in July.


Employment data and the Fed

The three reports offer a glimpse into what Friday's government employment report could reveal. Economists expect employers added 123,000 jobs in August, according to Briefing.com. Investors will pay especially close attention to Friday's jobs report, as it will likely influence the Fed's decision on more quantitative easing.


While recent reports show employers are limiting firings because of improved demand, weak hiring and an unemployment rate above 8% pose a "grave concern," Fed Chairman Ben Bernanke said last week as he made a case for further monetary easing.


Meanwhile, U.S. service industries expanded in August at a faster pace than forecast. The Institute for Supply Management's non-manufacturing index climbed to a three-month high of 53.7 from 52.6 in July. Economists had expected it to ease to 52.4, according to Briefing.com.


Stocks to watch

American International Group (AIG) has unveiled a plan to sell up to $2 billion shares of AIA Group Ltd. in Hong Kong to raise proceeds for general corporate purposes and said it has been authorized to buy back up to $5 billion in stock, MarketWatch reported.


Navistar International (NAV) shares soared after the company reported fiscal-third-quarter results that were lower than last year's but still beat expectations. The truck maker also unveiled a restructuring plan. 


VeriFone Systems (PAY) shares fell after the company reported a rise of 43% in fiscal-third-quarter net income on higher revenue, led by its services business. However, the electronics payment company also predicted weak fourth-quarter revenue.


Supervalu (SVU) will close about 60 "underperforming or non-strategic" stores in an effort to trim its expenses. The supermarket operator will record $80 million to $90 million in closure-related charges for fiscal 2013.


Amazon.com (AMZN) shares rose ahead of a media event in which the online retailing giant could unveil a new Kindle Fire tablet, according to analyst speculation.

Apple (AAPL), which is widely expected to show off its new iPhone 5 at an event next week, also rose.

154Comments
Sep 6, 2012 11:17AM
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This is crazy. The stock market is going up because the ECB is going to buy bonds so Countries already swimming in debt can go even deeper in debt. How does this solve any of the Unions problems. Massive unemployment is still there, huge national debt is still there and the Euro economy continues to shrink. Is Wall Street so blind and so unhappy that this is the best they can do for good news?

Our American economy added 12,000 jobs. Let's pop the cork and celebrate that as a sign we have turned the corner and happy days are here again.

There is no good news here. It is a bleak as it was yesterday. This is all smoke and mirrors.

Sep 6, 2012 11:18AM
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Uhhhh,  let me get this straight.  Things are so bad in Europe that no one will buy their bonds so they are going to monetize their debt.  They are also going to post the amount of bonds they buy so everyone will know who the loser countries are.   That sounds like a winner to me.  Let's buy some stock!  (better make that gold)  (nah make it seeds and bullets)

 

 

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and so it begins

 

The USA, JAPAN and now Europe are caught in the governmental debt trap with no way out

 

collapse of the western economies is merely a few months away

 

Europe is soon going to drop their key rate to zero

 

there is no way to operate the debt trap without zero percent interest rates

 

Well folks things have gone from the pan to the fire.

Sep 6, 2012 10:48AM
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Why is there so much fear or hate for God? If you choose not to believe, it's your choice. No one is forcing you to believe in God.

 

This is no different than our current political climate, you can choose to believe one side or the other. In the end who really knows who was/is right? Remember when the Iraq war started? Based on what they thought they knew at the time, both parties voted to go to war. Now after the fact, we find the supposed intelligence was flawed. Hind sight is 20/20. There are so many things in our daily lives that we'd like to do over based on what we know now. Life doesn't work that way. If we can't work together as a nation we will cease to exist as the USA we once knew. 

Sep 6, 2012 10:30AM
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" Claims in the previous week were revised to an increase of 3,000 to 377,000 compared with the initial estimate that they held steady at 374,000."

They always do this - report one number and then revise it the next week. Usually up.
Sep 6, 2012 11:32AM
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The world's economies will rebound quickly if everyone puts the screws to the socialists and stops their foolish pensions and spending.
Sep 6, 2012 10:12AM
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"Food stamp use reached a record 46.7 million people in June, the government said..."

The easiest way to acquire power and maintain control over people is to make as many of them dependent on you as possible.  The more people who are dependent on you, especially for the basic necessities of life, the more powerful you become.  The current administration has certainly been successful in their quest for more power and more control.  And almost half of us will vote to give them another 4 years to continue this quest  -  so sad.
Sep 6, 2012 11:24AM
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Without noting the "dissenter", one can surmise it is Germany, with a stable economy and banking sector.   Those voting FOR the continued "help" would likely be....  Portugal, Italy, Ireland, Greece, Spain and France....

 

Is it any wonder that those floundering would vote FOR bailouts while the stable one gets out voted.

 

I will submit it is similar to our up coming elections.   Those taking will out vote those giving.

 

But, it continues the facade of stability and functioning economies and governments so all is good in fantasy land.

Sep 6, 2012 11:15AM
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Surprise, Surprise - last weeks' first time jobless claims were revised UPWARD 3,000 to 377,000.  50 + weeks in a row, if my memory serves me correctly.

 

AGAIN ON JOBS CREATED-

 

The proof in the pudding is -

 

1. how many of these jobs were full time with benefits and paying at least $40,000 a year.

2. how many were part time with no benefits,

3. how many are contract labor jobs where you have to pay both the employer and employee Social Security and Medicare totaling 13.30% plus your income tax.  (Jan. 1, 2013 it will be 15.30% once again.)

4.  What % of these people are now making 20% or less than the previous position.

 

Even at $40,000 a year and benefits, these jobs will not get us out of the housing debacle.

 

Both parties can take #'s and make them look anyway they wish.  I talk to people everyday who have been out of work for a long time (I was out for 3 years), at 58 years old.  Many who have found work are working part time or contract worker w/ no benefits.  Glad I found something in a business other than banking.  It is so refreshing even if I only get 20 hours a week and have no benefits as a contract worker.  Happy to have what I have.  

Sep 6, 2012 11:36AM
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Money printing is only paper with ink on it. It's paper to them, but it's people's lives to those who need it to sustain themselves. The banker's gambit was taken and now the world pays.
Sep 6, 2012 11:49AM
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The one question I want to ask:  When will the coconut shells be flipped on Wall Street to unveil the greatest ponzi scheme in world history??  I think the answer is when ALL the 401k's, IRA's and defined pension plans actual value are ZERO.   
Sep 6, 2012 10:36AM
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The EU has been in recession (overall out put has shrunk in 2012), a 0.2 contraction in growth this quarter, their GDP down 0.5 from the same quarter last year, and yet everyone is feeling good about pilling more cheap debt on top of existing debt. WOW!!!!!

Good thing I'm in the position to 'ride this wave' without resorting to increasing my risk. Many are not, especially in Europe. Like I stated yesterday, try and keep your investment interests here in the USA or you'll get burned for sure.

Sep 6, 2012 10:30AM
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P O O F ! ! ! ! The world is FIXED !! Money  Jobs   Recovery ! ! ! ! ! POOF POOF ! ! ! ! Now everybody can buy a condo on the planet Bulls_t ! ! !
Sep 6, 2012 11:51AM
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Yet anoher hollow ECB promise based on the Bernanke money printing fraud technique that will amount to nothing. As for all the other 'good news' it is the standard operating procedure Oboob policy of manipulated data and out right lies to cover up the real state of the economy leading up to the election. Don't you believe it.
Sep 6, 2012 11:30AM
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more smoke and mirrors. and the idiot economists/gamblers, and government fools ars buying it. keep buying stocks so the short sellers can reap the profits and any long term investors will lose big time.
Sep 6, 2012 11:18AM
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Step into my cozy web said the spider....
Sep 6, 2012 10:19AM
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When plunder becomes a way of life for a group of men in a society ! Over a course of time they create for themselves a legal system that authorizes it and a moral code that glorfies it !    Written 162 years ago. Does it sound familiar ? Would not want to name any names=The To Big To Fail Banking Cartel=The ABOVE THE LAW GANG= SERIOUSLY TAKE YOU MONEY AND RUN !!
Sep 6, 2012 10:24AM
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Increase all in service sector jobs- McDonald's replacing college workers- wow that should buy a house.
Sep 6, 2012 10:11AM
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BONG BUYING??? Really, and all along I thought it was a bond issue. LOL.
Sep 6, 2012 10:14AM
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::.Stocks rally on ECB's bong-buying plan::.

LOL...bong-buying????  Maybe that'll work....LOL   Nice proofreading MSN...

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