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While you were sleeping: Results bolster mood

Thursday 21st October 2010

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Shares on Wall Street rebounded on better-than-expected results from companies including Boeing and Yahoo! and renewed expectations of Federal Reserve measures to stimulate growth.

In early afternoon trading, the Dow Jones industrial average gained 1.43%, the Standard & Poor's 500 Index advanced 1.36% and the Nasdaq Composite Index rose 1.27%

Delta Air Lines and US Airways Group jumped after reporting solid earnings. Boeing also advanced after raising its full-year earnings projection and Yahoo! climbed after third-quarter profit beat analysts’ estimates. Wells Fargo’s results added a positive banking boost too.

It wasn’t all good news.

Bank of America shares dropped to the lowest since June 2009 after analysts at Oppenheimer & Co and Stifel downgraded the bank to "perform" and "hold" respectively today, a day after a group of investors said they were pressuring the bank to compensate for losses on mortgage-secured bonds.

The bonds were sold by Countrywide Financial, which was later acquired by Bank of America, renewing some concerns about the potential for more housing-related hurdles.

The Stoxx Europe 600 Index ended the session 0.3% higher at 266.13 after seesawing for most of the day.

“Companies are for the most part beating their numbers this earnings season,” Scott Armiger, who helps manage about US$5.6 billion at Christiana Bank & Trust in Greenville, Delaware, told Bloomberg News.

“We’re back to the trend of a weaker dollar on the expectation that the Fed is going to initiate a second round of quantitative easing.”

The greenback sank, hitting a 15-year low against the yet, after a report from influential consultancy Medley Global Advisors said the Fed planned to buy US$500 billion of Treasury debt over six months to aid growth.

That’s roughly in line with what a top Fed official said yesterday in terms of the US central bank setting a target of buying about US$100 billion of bonds a month to continue to bolster liquidity.

The Fed is set to release its Beige Book, a regional business survey that will likely show a weakening recovery, at 2pm New York time, two weeks before the central bank’s November policy-setting meeting.

Before the release of the Beige Book, US Treasuries pared earlier losses. The US benchmark 10-year note yielded 2.47% at 11.27am in New York, after climbing to 2.51% earlier in the session, according to BGCantor Market Data.

Thirty-year bond yields shed two basis points to 3.9% while two-year yields declined two basis points to 0.34%.

The US currency dropped to a 15-year low under 81 yen. It last traded 0.6% down at 81.08 yen.

The euro gained 1.1% to US$1.3960, slightly below the 8-1/2-month high above US$1.41 reached last week.

The drop in the greenback supported gold a day after the precious metal suffered its biggest one-day drop since July 1.

Spot gold was bid at US$1,344.00 an ounce at 12.25pm EDT, against US$1,336.00 late in New York on Tuesday. US gold futures for December delivery gained US$8.30 an ounce to US$1,344.30.

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