The Standard & Poor's 500 Index rallied, erasing its loss for the year, while European equities surged with government bonds as European Central Bank President Mario Draghi expanded stimulus. The euro weakened to an 11-year low and oil tumbled.
The S&P 500 rose 1.5% to 2,063.33 at 4 p.m. in New York. The gauge capped a fourth straight gain, its longest streak this year, as banks and transportation companies surged amid better-than-forecast earnings. The Stoxx Europe 600 Index surged 1.7% to extend a seven-year high. The yield on 10- year Spanish bonds dropped to a record as euro-area bonds spiked higher. The euro declined 2.2% to $1.1360. Gold closed above $1,300 an ounce for the first time since August, while oil slid as U.S. supplies surged.
Draghi announced an expanded asset-purchase program, including private and public securities, of up to 60 billion euros ($69 billion) a month. The buying will continue through September 2016. The announcement came after the ECB kept benchmark rates unchanged at record lows. A U.S. report showed more Americans than forecast filed applications for unemployment benefits. The Dow Jones Transportation Average rallied 2.8% and the KBW Bank Index surged 3.6% amid corporate results.
"It's that halo effect of the follow-through on ECB finally coming to the table and embracing a pretty material stimulus program," Todd Lowenstein, who helps manage $16 billion at Highmark Capital Management in Los Angeles, said by phone. "It brings some hope that Europe will get pointed in the right direction."
ECB QE
The ECB pledged to buy government bonds as part of an asset-purchase program worth around 1.1 trillion euros. In addition to monthly purchases, the ECB also reduced the cost of its long-term loans to banks.
In the U.S., three rounds of Federal Reserve stimulus helped the S&P 500 more than triple from a bear-market low in March 2009. The central bank ended its quantitative easing program three months ago.
Corporate results determined some of the biggest moves in today's equities trading. Southwest Airlines Co. surged 8.3% for the second-steepest advance in the S&P 500. Fourth- quarter profit rose 71%, topping analysts' estimates, on lower jet fuel prices and solid demand across its U.S.-focused route network.
Banks, Trains
KeyCorp rallied 7.5% to lead banks higher. The regional lender's results beat estimates. Regions Financial Corp., Hudson City Bancorp Inc. and M&T Bank Corp. soared more than 4.5%.
Larger institutions also climbed. JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. surged at least 2.8%. Banks have been the worst performers among S&P 500 groups this year, with a loss of 2.9%.
Union Pacific Corp. added 4.7% as a strengthening U.S. economy and growing construction market boosted traffic on the rails.
F5 Networks Inc. plunged 11% after forecasting profit and sales below analyst projections. American Express Co. sank 2.9% after saying it will cut more than 4,000 jobs this year, while EBay Inc. added 6.7% following its results.
Leon Cooperman, who runs Omega Advisors Inc., said stocks can extend their gains as the economy improves and corporate profits rise.
"There's no basis to call for a market peak," Cooperman, 71, said today in an interview on Bloomberg Television with Betty Liu. "It could be a couple more years."
Forced Hand
European stocks rose for a sixth day, extending a rally that started after the Swiss National Bank's unexpected move to abandon its currency peg against the euro stoked speculation the ECB would buy government bonds.
A near-stagnant economy and the risk of deflation forced Draghi's hand today six years after the Fed took a similar step to inject cash into the U.S. The ECB president's gamble is that the benefits of quantitative easing outweigh the threat of a backlash in Germany and that the ECB ends up bailing out profligate, reform-wary governments.
"Markets were expecting big and this sounds like a pretty big program, so that's good news," Karyn Cavanaugh, the New York-based senior market strategist at Voya Investment Management LLC, said by phone. Voya oversees $215 billion. "We were all expecting it and finally we got what we were looking for."
