NEW YORK — Hopes that banks would start raising their dividends sent financial stocks sharply higher Wednesday.
Indexes closed at their highest levels in more than two years after a successful bond auction in Portugal eased worries about Europe’s debt crisis.
Portugal borrowed $1.6 billion at a lower long-term interest rate than many expected. Investors have been concerned that Portugal will struggle with its debts and become the third European country to require a bailout after Greece and Ireland.
Analysts cautioned that it’s still possible Portugal could need a financial lifeline if its economy slips back into recession this year.
“Things are not resolved completely here,” said Rob Lutts, president and chief investment officer of Cabot Money Management.
Banks led the market higher after an analyst at Wells Fargo Securities issued a report saying its earnings should grow much faster than other companies this year. He also said banks were likely to distribute more of their earnings to shareholders as dividends.
JPMorgan Chase rose 2.5 percent to $44.71 after chief executive Jamie Dimon told CNBC late Tuesday that the bank hopes to raise its dividend in the second quarter. JPMorgan’s stock led the 30 large companies that make up the Dow Jones industrial average, followed closely by Bank of America. Bank of America gained 2 percent to $14.99.
“The two major factors you own a bank for” — dividends and acquisitions — “have been absent in the last couple of years and are starting to emerge a bit,” said Randy Bateman, chief investment officer of Huntington Asset Management in Columbus, Ohio. “Most investors firmly believe that you have to have a strong financial move to perpetuate an economic rebound or recovery.”
The Dow rose 83.56 points, or 0.7 percent, to close at 11,755.44. That’s the Dow’s highest close since Aug. 11, 2008.
The Standard & Poor’s 500 reached its highest level since Aug. 28, 2008. The index gained 11.48, or 0.9 percent, to 1,285.96. The Nasdaq composite rose 20.50, or 0.8 percent, to 2,737.33.
ITT jumped 16.5 percent to $61.50 after the defense contractor said it would divide itself into three publicly traded companies. ITT plans to separate its defense-and-information, water-technology and industrial-products divisions.
That should make it easier for investors to understand the company’s various businesses, said Robert Pavlik, chief market strategist with Banyan Partners.
AIG slipped 1 percent to $58.40 after the company agreed to sell its stake in Taiwan’s third-largest insurer for $2.2 billion.
