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While you were sleeping: Wall Street's sigh of relief

Tuesday 19th October 2010

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Shares on Wall Street advanced, helped by better-than-expected results from Citigroup and expectations the Federal Reserve would further ease monetary policy.

Citigroup’s third-quarter net income of US$2.17 billion brings chief executive officer Vikram Pandit one quarter closer to achieving his first annual profit after losses in 2008 and 2009 that totaled US$29.3 billion.

The positive results bolstered the S&P 500 financial index by 1.6% today, after it shed 2.4% last week on concern that a broad probe by authorities into foreclosure practices would cut into bank earnings.

In early afternoon trading in New York, the Dow Jones Industrial Average rose 0.46%, the Standard & Poor's 500 gained 0.31% and the Nasdaq edged 0.02% higher. Investors were waiting with anticipation results from Apple, set for release after the closing bell.

"The financials last week were getting hammered over questions over foreclosure proceedings ... now it doesn't seem to be as all-encompassing," Marc Pado, US market strategist at Cantor Fitzgerald & Co in San Francisco, told Reuters.

Confidence among US home builders rose in October to the highest level in four months, adding to the overall optimistic tone in the market.

The National Association of Home Builders/Wells Fargo confidence index rose to 16, exceeding the most optimistic forecast in a Bloomberg News survey, from 13 the prior month, according to data from the Washington-based group.

Meanwhile, US Treasuries advanced too on expectations the Fed would buy more securities.

The yield on the 10-year note declined seven basis points to 2.49% at 12.46pm in New York, according to BGCantor Market Data.

Chicago Fed President Charles Evans said the US needed “much more” monetary accommodation to counter low inflation and high unemployment after Fed Chairman Ben Bernanke last week indicated so-called quantitative easing was likely. Policy makers meet in two weeks.

“The market is squarely focused on the Fed, as more easing seems expected,” Ian Lyngen  a government-bond strategist at CRT Capital Group told Bloomberg.

In Europe, the Stoxx 600 gained 0.3% to 266.64, the highest level in almost six months.

The Dollar Index, which measures the greenback against a basket of six major currencies, slipped 0.07% to 76.98, after rising to 77.645 earlier in the session.

The rally needs to extend above its October 12 high of 77.93 to signal a short-term bottom is in place after Friday's 10-month trough of 76.144, analysts told Reuters.

Oil gained rose as strikes France began to tap emergency fuel reserves as strikes by refinery and port workers continued and a growing number of fuel stations began to run dry.

US crude for November delivery rose 1.8% to US$82.68 per barrel by 1620 GMT, its biggest percentage gain in two weeks.

In London, ICE Brent December crude rose 1.8% to US$83.92 a barrel.

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