U.S. index futures gain amid optimism on Federal Reserve support

FRANKFURT – U.S. stock-index futures climbed, after the biggest three-day jump since 2011, amid investor optimism that the Federal Reserve will continue to support the economy.

Futures on the Standard & Poor’s 500 expiring this month added 0.2 percent to 2,071.4 at 8:36 a.m. in New York. Dow Jones Industrial Average contracts gained 55 points, or 0.3 percent, to 17,816. Futures on the Russell 2000 Index added 0.3 percent.

“It’s all about a continuation of the strength last week from Chair Yellen’s comments and the huge rally we had starting last Wednesday morning,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “If anything, you’re likely to see more impetus to show more equity positions and less cash going into year end, and you’re likely to see short positions drawn down.”

U.S. equities jumped 5 percent in the past three sessions as Fed Chair Janet Yellen said the central bank will likely hold key rates near zero at least through the first quarter, even as the U.S. economy strengthens.

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The gauge erased its loss for the month and closed 5 points below a record of 2,075.37 reached Dec. 5. The S&P 500 has advanced in each of the past six Decembers.

A slide in oil prices and a worsening of the financial crisis in Russia rippled through financial markets earlier this month, wiping more than $1 trillion from U.S. equity values in less than two weeks. The S&P 500 lost 5 percent in seven trading days through Dec. 16.

Fifth recovery

Equities rallied around the world after the central bank said it will be patient on the timing of a rate increase. Yellen said any spillover from the situation in Russia is likely to be small.

The benchmark index is points away from completing the fifth recovery this year from a decline of 4 percent or more, just 14 days after it started. In comparable drops beginning in January, April, July and September, the S&P 500 needed about a month to erase losses, data compiled by Bloomberg show.

U.S. stocks have tripled during the 5 1/2-year bull market, driven by the Fed’s three rounds of bond buying and borrowing costs near zero to stimulate the economy.

Data today will show existing-home sales in the U.S. slipped to 5.20 million in November from 5.26 million in October, according to economists’ forecasts.

Even as stocks rebounded, JPMorgan Chase & Co. and Bank of America Corp. have warned that equity volatility is picking up and upheavals will become more common next year. Three weeks into December, the Chicago Board Options Exchange Volatility Index has already risen 99 percent and fallen 30 percent.

Volatility jumps

It’s the second time in two months that the gauge of trader anxiety known as the VIX jumped above 20, only to erase more than half its gain within three days. Bouts of volatility are likely to plague investors more in 2015 as the Fed gets closer to raising interest rates, according to strategists from the banks.

Cubist Pharmaceuticals rose 2.3 percent. The drugmaker that is being taken over by Merck & Co. said that the U.S. Food and Drug Administration approved its Zerbaxa antibiotic for the treatment of urinary-tract and abdominal infections.

Gilead Sciences Inc. slid 11 percent. Express Scripts Holding Co., which manages prescriptions for U.S. insurance plans, will make AbbVie Inc.’s hepatitis C drug available to all patients with the nation’s most common form of the disease, while excluding Gilead’s Sovaldi and Harvoni treatments from Jan. 1 for most patients.

Other drug companies retreated. Biogen Idec Inc. and Eli Lilly & Co. lost more than 1.6 percent. Celgene Corp. slipped 1.3 percent.

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