Markets End Fed-Fueled Rally Higher, Carried By Resource Stocks

Stocks ended higher Friday for a second day, giving in to profit-taking just before the close after the U.S. Federal Reserve yesterday ignited a global rally by announcing a third round of quantitative easing. Economic data, including a unexpected rise in consumer sentiment this month, contributed to today's advance. Most sectors in the S&P 500 were higher, led by gains in commodity stocks. Shares of healthcare, telecom and consumer staples companies sagged as traders largely chased riskier asset plays.

Stocks responded today to a slew of mostly positive economic data, including the Thomson Reuters/University of Michigan consumer sentiment index rising to a preliminary 79.2 reading, up from 74.3 in August and topping expectations in a Reuters poll for a decline to 74.0.

Also, U.S. consumer prices rose 0.6% in August, largely due to a 9% surge in gasoline prices, the Labor Department said. Stripping out volatile food and energy costs, the core price index rose 0.1% for a second straight month. The median forecast of 85 economists surveyed by Bloomberg News called for an advance of 0.6% in the overall rate while projecting a 0.2% rise in the core rate. Consumer prices have climbed 1.7% over the last 12 months.

Business inventories posted their largest gain in six months in July, rising 0.8% to a record $1.59 billion following only a 0.1% rise during June, the Commerce Department reported today. Economists polled by Reuters had forecast stockpiles rising only 0.3% in July.

U.S. retail sales rose a seasonally adjusted 0.9% in August, mainly due to rising auto and gasoline sales, the Commerce Department said in a separate report today. Economists surveyed by MarketWatch expected retail sales to rise by 0.8% last month, Gas stations reported a 5.5% increase in sales, and auto sales rose 1.3% last month. Over the past year, retail sales in the U.S. have risen 4.7%.

In company news, Unitedhealth Group, Inc. (UNH) ended with a 0.3% advance after the healthcare insurer was selected to replace Kraft Foods (KFT) in the Dow Jones industrial average, effective at the start of trading on Sept. 24.

The index managers, S&P Dow Jones Indices said that the change is intended to better reflect the impact of healthcare on economy activity and was prompted by plans by KFT to spin off its North American grocery business next month. It was a relatively brief stay for the stock in Dow, lasting only four years since the food company replaced American Insurance Group (AIG) in the wake of 2008 financial crisis. KFT shares were down 0.9% just before the close.

Commodity futures were mostly higher on dollar weakness following yesterday's Fed action. Crude oil for October rose 64 cents to settle at $98.94 a barrel. October natural gas finished 10 cents lower at $2.94 per 1 million BTU. December gold rose 80 cents to $1772.80 an ounce while December silver fell 12 cents to $34.64 an ounce. December copper rose 9 cents to $3.83 a pound.

Here's where stocks stood at end-of-day:

Dow Jones Industrial Average up 53.51 (+0.40%) to 13,593.37

S&P 500 up 5.78 (+0.40%) to 1,465.77

Nasdaq Composite Index up 28.12 (+0.89%) to 3,183.95

GLOBAL SENTIMENT

Hang Seng Index up 2.90%

Shanghai China Composite Index up 0.64%

FTSE 100 Index up 1.64%

UPSIDE MOVERS

(+) ALOG, Announces Q4 Street Beat

(+) DARA, Gets Exclusive U.S. Commercial Rights to Gelclair from Helsinn

(+) MTL, Inks Supply Pact with RAO

DOWNSIDE MOVERS

(-) CUR, Prices Offering

(-) AUMN, Commences Equity Financing

(-) WERN, Pares Q3 guidance.