Stocks post gains ahead of 'stress test' news

• Article
• Comments ()
• Click-2-Listen

By Joseph Weber

Wall Street posted gains Wednesday after a report that the ranks of the jobless are growing more slowly and ahead of the government's much anticipated "stress test" report on U.S. banks.

The Dow Jones Industrial Average closed at 8,512.28, up 101.63 points. The broader Standard & Poor's 500 Index closed at 919.53, up 15.73, and the tech-heavy Nasdaq Composite Index closed at 1,759.10, up 4.98 points.

The ADP National Employment Report stated the number of private-sector jobs decreased by 491,000 in April, compared with 708,000 jobs lost in March. The report also said that unemployment likely will increase for several more months, but at a slower rate.

Investors have been concerned about U.S. banks not having enough capital to survive an extended or worsening recession. Their concerns are expected to be answered Thursday when the government releases the results of its so-called "stress tests" on 19 of the country's largest financial institutions.

Bank of America Corp., Citigroup Inc. and Wells Fargo reportedly need more capital, while American Express, JPMorgan Chase & Co. and Bank of New York Mellon Corp. do not.

Bank of America stock closed at $12.69 a share, up 17.07 percent. American Express closed at $27.13, up 2.11 percent.

Brian Lipps, a Charles Schwab & Co. vice president, acknowledged the information is based on leaks and speculation, but said the bottom line appears that the findings will be better than expected.

"As has been the case, the banks are the story," he said.

The federal government has lent trillions to help banks recover since the collapse of the financial industry, so the resumption of bank lending is considered an essential part of the economic recovery.

The major markets are up about 30 percent since hitting 11-year lows in early March in a rally that largely has followed first-quarter reports by major U.S. banks that were better than expected.

The recent gains appear to show the worst of the recession might be over, but investors remain cautious and the markets still are down significantly from their October 2007 highs.

Federal Reserve Chairman Ben S. Bernanke said Tuesday before Congress that a major focus of the stress tests was the capital "buffers." Record-high unemployment likely will increase until the economy begins to recover later this year, he said ahead of a Labor Department report Friday on April unemployment that investors will be watching closely.

"The ADP report was very upbeat," Mr. Lipps said. "It bodes well for the Labor Department report."

Overseas, Hong Kong's Hang Seng index increased 2.46 percent, Britain's FTSE 100 increased 1.4 percent, Germany's DAX index increased 0.6 percent, and France's CAC-40 was up 1.8 percent.