View full sizeWall Street opened higher Thursday morning on good news from China. The Dow Jones index could run positive for the third consecutive day.
Stocks opened sharply higher on Wall Street after China cut its
benchmark lending rate in another bid to boost its slowing economy.
The
Dow Jones industrial average rose 93 points at 12,506 after the first
40 minutes of trading. The Dow surged 286 points the day before as hopes
grew that more economic stimulus is on the way in both the U.S. and
Europe.
China cut its benchmark lending rate Thursday for the
first time in nearly four years, adding to efforts to reverse a sharp
economic downturn. It was the first rate cut since November 2008.
Beijing
has rolled out a series of measures to stimulate its economy after
growth fell to a nearly three-year low of 8.1 percent in the first
quarter and April factory output grew at its slowest rate since the 2008
crisis. Private sector analysts expect this quarter’s growth to fall
further.
The rate cut is a huge boost for global investors. China
has been a major engine of global economic growth over the past few
years as the U.S. sputtered and debt crises spread through several
countries in Europe.
The price of crude oil jumped 2 percent to
$86 a barrel in reaction to the China news. Faster economic growth in
China would mean more demand for energy and other basic materials. The
dollar and U.S. Treasury prices fell as investors sold lower-risk
investments.
Traders will be closely watching Fed Chairman Ben
Bernanke’s appearance before a congressional committee Thursday for any
hints that the U.S. central bank is considering more monetary stimulus.
In prepared testimony, Bernanke said the Fed is still prepared to act,
but he didn’t signal any immediate steps.
Hopes grew for more
action from the U.S. central bank after Atlanta Federal Reserve
President Dennis Lockhart said that sustained weakness in job creation
could justify more action to support the economic recovery.
The
Fed is believed to be considering a third round of “quantitative
easing,” or purchases of Treasury bonds to try to lower long-term
interest rates and encourage borrowing. Traders have speculated that a
third round is under consideration.
Markets are also hopeful that
Europe is preparing to give Spain financial aid to help it cope with the
cost of saving its banks. Spain’s government cannot afford to rescue
its banking sector but is reluctant to accept a full-fledged bailout
from its partners in the euro, as that would mean giving up control over
some of its domestic policies.
Stabilizing Spain is crucial to
calming the debt crisis because Europe would not be able to bail out the
country, which has the fourth-largest economy in the currency bloc.
In
other trading, the Standard Poor’s 500 index rose 13 points to
1,328 and the Nasdaq composite index rose 29 points to 2,873.
Among stocks making big moves:
—
Sprint rose 7 cents, or 3 percent, to $2.79 after announcing that it
would start selling Apple’s iPhone to customers of its Virgin Mobile
no-contract phone service.
— Molina Healthcare plunged $7.62, or
30 percent, to $18.14, after the health insurer withdrew its 2012 profit
forecast, citing a possible revenue shortfall in Texas. Molina said
member claims in Hidalgo and El Paso have far exceeded its estimates and
as a result, the premium revenue it is collecting there will not likely
be enough to cover its medical costs.
— Men’s Wearhouse dropped
$5.66, 16 percent, to $29.91 after the clothing chain reported
lower-than-expected results and issued a weak forecast for its second
quarter.
– The Associated Press
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