* Energy, financials rise on hope for economic stimulus
* Chesapeake Energy rises after pledge to cut spending, sell
* Elan Corp slides as Pfizer, J&J scrap Alzheimer's drug
* Indexes up: Dow 0.4 pct, S&P 0.5 pct, Nasdaq 0.9 pct
By Ryan Vlastelica
NEW YORK, Aug 7 U.S. stocks rose for a third
straight day on Tuesday, pushing the S&P above 1,400 for the
first time since early May, on growing optimism the European
Central Bank would act soon to contain the euro zone's debt
Trading was light, which could distort the level of optimism
investors truly have that Europe will follow through with
adequate measures. ECB President Mario Draghi boosted hopes last
week when he spoke of restoring calm to the euro zone's troubled
Since then, good news from Greece and declines in borrowing
costs for Spain and Italy from peaks above 7 percent have kept
sentiment positive. The relative calm allowed the S&P to break
through the psychologically important 1,400 level after trying
unsuccessfully the past couple of sessions.
"If the ECB expands its balance sheet, it will keep pushing
these bond yields lower, which can help these countries finance
their debt, giving markets a bit of reprieve," said Joseph
Tanious, global market strategist at J.P. Morgan Funds in New
York. "It's likely we won't get anything official for a few
weeks, and until then investors are likely to be skittish."
Summer holidays have added to light trading volume, which
has contributed to volatility. Equities cut their gains just
before the close on Tuesday, mirroring Monday's late-day action.
About 6.39 billion shares traded on the New York Stock
Exchange, the American Stock Exchange and Nasdaq, below last
year's daily average of 7.84 billion.
The real tests for markets may come in September. The ECB is
expected to face decisions about controlling the euro zone debt
crisis and the Federal Reserve could take stimulus actions to
aid the flagging U.S. economic recovery.
The Dow Jones industrial average rose 51.09 points,
or 0.39 percent, at 13,168.60. The Standard & Poor's 500 Index
was up 7.12 points, or 0.51 percent, at 1,401.35. The
Nasdaq Composite Index was up 25.95 points, or 0.87
percent, at 3,015.86.
Despite worries over the economies of Europe and the United
States, investors have pushed the S&P 500 up more than 11
percent so far this year. Yield-hungry investors have kept
buying stocks as U.S. and German government bond prices soar and
yields hit historic lows.
Tuesday's advance was led by stocks in cyclical sectors like
energy, materials and consumer discretionary, while defensive
sectors like telecoms and utilities edged lower.
Energy stocks rose 1.3 percent, helped by Chesapeake
Energy, which jumped after it said it would sell some
assets and spend less on new properties. The stock surged 9.4
percent to $19.37 and was one of the top percentage gainers in
the S&P 500.
Banking shares rose 0.5 percent, lifted by Morgan
Stanley, which was up 2.5 percent at $14.50.
"Despite what seems like a weekly scandal of some sort, the
banks have posted incredibly large profits. The Fed has made it
very easy for them to take on very little risk and make very
large profits," said Randy Frederick, managing director of
active trading and derivatives for Charles Schwab in Austin,
Watch and fashion accessory maker Fossil Inc soared
32 percent to $91.77 after it forecast growth in Asia and
With 82 percent of S&P companies having reported quarterly
results, 68 percent have beaten profit expectations, according
to Thomson Reuters data.
Pfizer and Johnson & Johnson scrapped
further studies of an experimental drug for Alzheimer's disease
after the drug failed in a second trial. U.S.-traded shares of
their partner, Elan Corp, dropped 0.9 percent to $11.15.
Pfizer fell 2.1 percent to $23.74 and J&J edged 0.8 percent
lower to $68.29.
A group of investors rescued Knight Capital Group in
a $400 million deal that kept the market maker in business, but
existing shareholders were nearly wiped out. Knight closed 0.3
percent lower at $3.06, erasing gains of more than 3 percent
from earlier in the session.
About 62 percent of stocks on the New York Stock Exchange
closed higher while 61 percent of Nasdaq-listed stocks finished