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For many investors, breaking even never felt so good.

Following a four-month melodrama of brutal losses and heady gains, a steep plunge in financial markets early in the year was all but erased Monday. The S&P 500 index, which millions of investors use as a benchmark for their portfolios, recovered all of the losses that brought markets to a 12-year low on March 9.

Of course, stock markets are still down 40 percent from their all-time highs, and the run higher could still peter out if rising unemployment leads to new unexpected losses in the banking system.

But each new day of gains in stocks stokes hope that the economy’s worst days are waning, analysts said.

“You like to make money instead of lose money,” said Thomas H. Forester, a mutual fund manager. “It feels better, huh?”

Stocks surged as investors grew more optimistic that the some of the economy’s most troubled sectors may be mending. There was optimism that the government’s stress tests of major banks would calm fears about the health of the financial system. Signs of improvement in the housing market and the construction industry also lifted sentiment that these economic cornerstones may be firming. And fears of a swine-flu pandemic, which last week stoked concerns about an impact to the recession, appeared to ease.

“The fact that we’re not going down and not correcting is important,” said Richard Sparks, vice president of research at Schaeffer’s Investment Research. “It shows the persistence of the rally.”

Financial stocks jumped 10 percent, leading the day’s gains, as investors clung to a belief that the financial system was in better shape than they had once feared. Regional banks gained ground, and shares of Bank of America, Wells Fargo and U.S. Bancorp rose by double digits. The government’s health check of the nation’s 19 largest banks, scheduled to be unveiled Thursday, are expected to show that the financial system is broadly sound, even if a handful of banks must raise billions in new capital as fresh insurance against the recession.

Energy companies and materials producers climbed higher as the prices of oil and copper rose, pushed up by hints of an economic thaw.

The S&P 500 jumped 29.72 points, or 3.4 percent, to close at 907.24 points on Monday. The surge gave the index a 2009 gain of 0.44 percent after a grinding start to the year.

In contrast, the Nasdaq composite index is up 11.8 percent since the beginning of January, buoyed by gains in technology companies. On Monday, the Nasdaq rose 44.36 points, or 2.6 percent, to 1,763.56.

The Dow Jones industrial average gained 214.33 points, or 2.6 percent, to 8,426.74. The Dow remains down nearly 4 percent for the year to date.

Some companies have soared in the rollercoaster start to the year. The cell phone provider Sprint Nextel is up 173 percent since Jan. 1. Shares of Ford, the only big American automaker that did not seek a government bailout, are up 158 percent. Whole Foods and Goodyear Tire have more than doubled, although from low levels.