Broad-based buying on the back of Basel III boosted stocks to their fourth straight gain, or seventh advance in eight sessions. Still, participation remained unimpressive.
Basel III was released overnight. The international regulatory code dictates that required common equity will increase to 4.5% from 2.0% and that a capital conservation buffer of 2.5% is necessary. The stricter requirements will be phased in over a nine year span... Since there had been concerns about capital levels among Europe's banks, the absence of negative surprises in Basel III helped European bank stocks bounce in overnight trade. That, coupled with news that the European Commission now expects eurozone GDP to increase 1.7% instead of 0.9% in 2010, drove Europe 's major bourses to big gains. Meanwhile, the euro rallied 1.5% against the greenback... Asia 's major equity averages also advanced handsomely. They were helped by news that August industrial production in China grew a stronger-than-expected 13.9% year-over-year and that China 's August retail sales grew a stronger-than-expected 18.2% year-over-year. Consumer prices in China increased 3.5% in August, as had been widely expected.
An agreeable Basel III and strong overseas action set the stage for the S&P 500 to make a heady move of its own. It ran into some mild selling pressure midsession, but recovered to book a 1% gain and settle at a one-month closing high. It also broke above its 200-day moving average for the first time in one month.
Banks were among the biggest beneficiaries of this session's bounce. The KBW Bank Index advanced 3.0%, which puts it up 11% from the 2010 low that it set only nine sessions ago... Semiconductor stocks were also strong. As such, the Philadelphia Semiconductor Index spiked 3.4%. Their strength helped the Nasdaq outperform the other headline indices... Of the 10 major sectors, only the consumer staples settled with a loss. They shed 0.1%.
Trading volume failed to break 1 billion shares on the NYSE as many investors continue to sit on the sidelines, skeptical of whether the stock market can sustain its bullish streak now that it is already up about 7% since the start of September.
Commodities pits benefited from the positive tone among traders this session. Specifically, the CRB Commodity Index advanced 0.9% to a new one-month high as oil prices advanced 0.9% to $77.19 per barrel. Their session high of $78.04 per barrel marked a one-month best. Meanwhile, silver settled 1.4% higher at $20.15 per ounce after it traded to a fresh 29-month high.
Merger and acquisition activity were at the center of corporate activity. ArcSight (ARST 43.91, +8.81) will be acquired by Hewlett-Packard (HPQ 38.28, +0.08) for $43.50 per share, Hertz (HTZ 10.84, +0.79) will pay $50 for each outstanding share of Dollar Thrifty (DTG 50.58, +2.57) and 3M (MMM 84.86, +0.92) has offered $10.50 for each outstanding share of Cogent (COGT 10.86, -0.07).
S&P 500 +1.1%, Dow +0.8%, Nasdaq +1.9%, Nasdaq 100 +1.6%, S&P 400 +1.8%, Russell 2000 +2.5%