Big rally on Wall Street
Wells Fargo's surprisingly upbeat forecast gives stocks a boost. Market gains for fifth straight week.
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| The S&P 500 this week. |
NEW YORK (CNNMoney.com) -- Stocks rallied Thursday, ending a holiday-shortened week on a high note after Wells Fargo forecast a nearly $3 billion quarterly profit, adding to hopes that the banking sector is stabilizing.
It was the fifth straight week of gains for the markets. In that time the Dow rose 22%, for its best five-week run since May of 1933, when it gained 31%.
The Dow Jones industrial average (INDU) gained 246 points, or 3.1%. The S&P 500 (SPX) index rose 31 points, or 3.8%. The Nasdaq composite (COMP) gained 62 points, or 3.9%.
Stocks rallied Wednesday as a housing-sector merger and optimism about the recovery overshadowed the Fed's dour economic forecast. On Thursday the advance continued, although on lighter trading volume due to the holidays. Thursday is Passover and all financial markets will be closed on Good Friday.
"I think a lot of investors have been waiting for good news around the banks," said Tyler Vernon, portfolio manager at Biltmore Capital. "They've been getting good news from the government on the banks, but hearing this from Wells Fargo was unexpected."
At the same time, Vernon said he's concerned that the recent rally has been too much, too fast, and that individual investors are getting in at the wrong time.
Stocks have essentially been on a tear since the Dow and S&P 500 hit 12-year lows on March 9.
After initially being driven by traders, hedge funds and other professional market makers, the recent advance has seen individuals jumping back in.
For the last two weeks, investors have put money into equity mutual funds, according to Trim Tabs, after weeks of pulling money out of funds. In the week ended Wed. April 8, investors put $11.9 billion into stock mutual funds after adding $3 billion in the previous week.
And the CBOE volatility index, or the VIX (VIX), Wall Street's fear measure, closed Thursday at its lowest point since late September.
Financials: San-Francisco-based Wells Fargo (WFC, Fortune 500) said it expects to report income of about $3 billion, or 55 cents per share, in the first quarter, surpassing analysts' current estimates.
The bank said the strong quarter was due to the performance of its traditional banking and mortgage units, as well as the continued benefits from its purchase of Wachovia. Wells' shares jumped 31.7%.
A variety of financial shares surged in tandem, including Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Morgan Stanley (MS, Fortune 500).
The KBW Bank (BKX) sector index gained 20%.
In other news, U.K. bank Barclays (BCS) said it will sell its U.S.-based asset management business to European private equity firm CVC Capital Partners Group in a deal worth $4.4 billion. U.S.-traded shares of Barclays gained 11%.
Retailers: March sales at the nation's retailers slumped 1.8%, versus expectations for a drop of 0.9%. The results were something of a setback following an improvement in February, when sales rose 0.3%.
Many retailers blamed the weaker sales on the later Easter this year - with the holiday falling on April 12 versus March 23 last year.
Leading retailer Wal-Mart Stores (WMT, Fortune 500) reported a 1.4% rise in sales at stores open a year or more, a retail sector metric known as same-store sales. But that was short of the 3.2% rise analysts were expecting. (Full story)
Wal-Mart lost 3.7% and was one of only 4 Dow stocks not participating in Thursday's advance.
Other company news: Warren Buffett's Berkshire Hathaway (BRKA, Fortune 500) lost its top credit rating at Moody's. The agency cut the rating on Buffett's diversified company by two notches, saying the recession and the company's investment losses were making it harder for Berkshire to meet its funding needs.
Dow component 3M (MMM, Fortune 500) is offering 3,600 employees, or around 11% of its workforce, early retirement packages, as it contends with the ongoing recession. The company, often seen as a proxy for the economy due to its varied businesses, has already cut 3,600 jobs this year.
Market breadth was negative. On the New York Stock Exchange, winners beat losers by more than seven to one on volume of 1.84 billion shares. On the Nasdaq, advancers topped decliners four to one on volume of 2.19 billion shares.
Economy: Two government reports were released Thursday. The February trade gap shrank 28.3%, falling to its smallest level since November 1999.
The weekly jobless claims report showed the number of people filing new claims for unemployment dipped to 654,000 from 674,000 the previous week. But the number of people who have been receiving benefits for a week or more rose to an all-time high of 5.84 million.
Bonds: Treasury prices tumbled, raising the yield on the benchmark 10-year note to 2.92% from 2.88% Wednesday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, Asian and European markets gained.
In currency trading, the dollar gained versus the euro and the yen.
U.S. light crude oil for May delivery settled up $2.86 to $52.24 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery fell $2.60 to settle at $883.30 an ounce. 
