U.S. stocks rose early Thursday, after a three-day rally in the Standard & Poor’s 500 Index, as regional banks and transportation companies posted better-than-forecast earnings and the European Central Bank unveiled an expanded stimulus plan.
KeyCorp led gains among regional banks after fourth-quarter results topped analyst estimates. Southwest Airlines Co. jumped 6.7 percent as profit rose 71 percent on lower jet fuel prices. Union Pacific Corp. added 4.1 percent as a strengthening U.S. economy and growing construction market boosted traffic on the rails in the fourth quarter.
The S&P 500 gained 0.69 percent to 2,041.91 at 11:11 a.m. in New York. The Dow Jones Industrial Average climbed 121.56 points, or 0.69 percent, to 17,675.84. Trading in S&P 500 companies was 28 percent above the 30-day average for this time of the day.
Draghi announced an expanded asset-purchase program, including private and public securities, of up to 60 billion euros ($69 billion) a month. The buying will continue through September 2016. The announcement came after the ECB kept benchmark rates unchanged at record lows.
“Markets were expecting big and this sounds like a pretty big program, so that’s good news,” Karyn Cavanaugh, the New York-based senior market strategist at Voya Investment Management LLC, said by phone. Voya oversees $215 billion. “We were all expecting it and finally we got what we were looking for.”
QE has been long in the making. The ECB took a step in that direction in 2010 when it bought the bonds of debt-strapped countries such as Greece. That was opposed by then-Bundesbank President Axel Weber, opening a rift between the ECB and the German central bank whose uncompromising stance on inflation inspired its design.
In recent weeks, current Bundesbank President Jens Weidmann and his former deputy Sabine Lautenschlaeger, now on the ECB’s Executive Board, have been the loudest voices against more stimulus. Their argument: The slump in oil prices that’s damping inflation will bolster the economy as previously announced measures begin to take effect.
A near-stagnant economy and the risk of deflation forced Draghi’s hand six years after the Federal Reserve took a similar step to inject cash into the U.S. The 67-year-old Italian’s gamble is that the benefits of quantitative easing outweigh the threat of a backlash in Germany and that the ECB ends up bailing out profligate, reform-wary governments.
“This is a step in the right direction,” John Fox, director of research at Fenimore Asset Management in Cobleskill, New York, said in a phone interview. “It had been widely anticipated that they were going to do something, so they’re not surprising the market, but they still gave investors something positive.”
The ECB’s shift exacerbates an emerging global divergence in monetary policy. While the Fed is now considering when to tighten credit, central banks in Denmark, Turkey, India, Canada and Peru all announced surprise rate cuts in the past week. The Swiss National Bank shocked investors by dropping a cap on the franc.
U.S. stocks rose for a third day on Wednesday as energy shares rallied and speculation grew that the ECB will provide more stimulus. The S&P 500 has climbed 2.5 percent following its second five-day slide this year as investors have weighed earnings reports and oil held above an almost six-year low set Jan. 13.
The S&P 500 rose 0.5 percent Wednesday and moved 1.3 percent from its lowest to highest levels. That’s the 14th straight swing of more than 1 percent intraday, the longest stretch since an 18-day run ending on June 21, 2012, data compiled by Bloomberg show.