NEW YORK (MarketWatch) — U.S. stocks on Friday notched a third month of gains that have largely priced in another round of easing by the Federal Reserve and policy action in Europe to address its debt crisis.
The market drew “a lift today on further confirmation that [Fed Chairman Ben] Bernanke does have another round of QE in his back pocket,” said Jeffrey Kleintop, chief market strategist at LPL Financial.
After an 151-point rise, the Dow Jones Industrial AverageDJIA+0.69% ended up 90.13 points, or 0.7%, to 13,090.84, down 0.5% for the week and up 0.6% for August.
Off 0.3% for the week and up 2% for the month, the S&P 500 index SPX+0.51% added 7.10 points, or 0.3%, to 1,406.58, with materials and energy pacing the gains and utilities the laggard among its 10 sectors.
The Nasdaq Composite COMP+0.60% gained 18.25 points, or 0.6%, to 3,066.96, off 0.1% for the week and up 4.3% for the month.
For every stock falling, more than two gained on the New York Stock Exchange, where nearly 746 million shares traded. Composite volume approached 2.9 billion.
“The true test of the market advance will come when more investors come back in September. Volume has been anemic,” Michael Sheldon, chief market strategist for RDM Financial, said of low-trading levels.
Though volume ticked up on Friday, the average daily volume in August for NYSE-listed shares was 3 billion, the lowest monthly average since May 2007, according to the Wall Street Journal’s data group. For Nasdaq-listed shares, average August volume of 1.54 billion was the lowest since August 2005.
In Bernanke’s much-anticipated speech, delivered two weeks before the next Federal Open Market Committee meeting, the Fed chief reiterated prior comments that the central bank stood ready to act, as needed.
Fed chairman Ben Bernanke expressed concern over the labor market, defended the central bank's monetary policies and left no doubt he plans to do more to lift the economy at the next meeting in September. Photo: AP
Unless economic growth picks up more rapidly than it has recently, the unemployment rate would likely remain elevated, Bernanke said. Read text of Bernanke’s speech.
“It certainly seems he’s making an impassioned case for the ethicality of further monetary easing. If he believes it, and the board believes it, and they continue to see the dire need for it, we’re probably going to get something,” said Bruce McCain, chief investment strategist at Key Private Bank.
“Stocks have mostly priced in odds of QE3 taking place along with substantial policy actions out of the Europeans, with what’s going on with gold and silver being up today on weakness in the dollar that’s clearly associated with Bernanke’s coming likely actions,” said Kleintop at LPL Financial.
The bigger news Friday morning were media reports that the European Commission plans to give the European Central Bank supervisory powers over the euro-area banking sector, said Sheldon at RDM Financial.
“The ability of the European Union to stabilize and fix its banking sector is extremely important in terms of the global picture,” Sheldon said.
“Clearly things are not good here, but they’re not bad. In Europe, things are worse. There is a more realistic hope the ECB will intervene,” said Key Private Bank’s McCain.
US Airways Group Inc. LCC+2.50% shares rose on news the carrier was holding merger talks with AMR Corp. AAMRQ+3.92% , the parent company of American Airlines, which filed for bankruptcy reorganization late last year.
U.S. economic reports on Friday had factory orders in July rising the most in a year and the Reuters/University of Michigan consumer-sentiment index climbing to top market expectations.
Kate Gibson is a reporter for MarketWatch, based in New York.