Positive domestic economic reports along with encouraging results from a leading housing company drove major benchmarks into positive territory. On the international front, in an attempt to pacify investor concerns over China’s credit crunch, People’s Bank of China said it would inject cash into financial institutions. All the top ten S&P 500 industry groups posted gains among which financial stocks gained the most.
For a look at the issues facing today's markets, read our Ahead of Wall Street for June 26 article.
The Dow Jones Industrial Average (DJI) gained 0.7% to close the day at 14,760.31. The S&P 500 increased 1.0% to finish yesterday’s trading session at 1,588.03. The tech-laden Nasdaq Composite Index rose 0.8% to end at 3,347.89. The fear-gauge CBOE Volatility Index (VIX) lost 2.3% to settle at 18.47. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.73 billion shares, above 2013’s average of 6.36 billion shares. Advancing stocks outnumbered the decliners for 75% that advanced, 20% declined.
Major indices accrued gains of around 1% during yesterday’s trading session. These increases are primarily attributable to domestic economic reports. The S&P 500 gained nearly 1%, though it is still 4.9% shy of its all-time high. New home sales data boosted investor confidence the most. According to the U.S. Department of Commerce, sales of new single-family houses for May came in at 476,000. The figure is well above the consensus estimates of 461,000 and April’s figure of 466,000. On a year over year basis, housing starts improved 29%.
In addition to positive new home sales data, the S&P/Case-Shiller home price index provided investors with further encouragment. The S&P/Case-Shiller 10-City home price index and The S&P/Case-Shiller 20-City home price index came in at 165.63 and 152.37, respectively for April. On an annual basis, this indicates a rise of 11.58% and 12.05%, respectively. These figures are at their highest levels in seven years and have also recorded their biggest gain in one month since the introduction of this index.
Meanwhile, the U.S. Department of Commerce said durable orders increased 3.6% compared to the consensus estimate of 3.3%. However, on a month over month basis, the figure remained unchanged. Shipments of manufactured durable goods increased 1.2% while growth in transportation equipment was recorded at 3.6%. Among capital goods, nondefense new orders increased 9.3% while defense new orders increased 12%.
Another factor which improved investor sentiment was the Conference Board Consumer Confidence Index. The index came in at 81.4 compared to 74.3 in May. The Present Situation Index and Expectations Index improved to 69.2 and 89.5 compared to 64.8 and 80.6, respectively. Consumer’s assessment of current conditions improved in June. Opinions about good business conditions improved to 19.1% and opinions on bad business conditions declined to 24.9% from 26%. Consumer’s opinion on labor market also improved.
On the international front, in an attempt to calm investors People’s bank of China (PBOC), said they would inject cash to support the economy if the situation arises. Yesterday, Asian markets had suffered losses after benchmarks went into a free fall. Major indices plunged to a four and a half year low. Yesterday the PBOC said: “The central bank will also take necessary measures to help those institutions who have problems in managing liquidity to maintain overall stability in the money market.” The interest rates on an overnight and 7-day basis came down to 5.8% and 7.4%, respectively but still remained above average levels.
On the earnings front, Lennar Corporation (NYSE:LEN) gained 0.7% after it posted better-than-expected results yesterday, indicating an improvement in the housing sector. Orders of the company increased 27% while the backlog increased 55%. CEO of the company, Stuart Miller, said: “The housing recovery is still very much intact and the fundamentals of that recovery remain solid.”
All the top ten S&P 500 industry groups posted gains among which financial stocks emerged as the biggest gainer. Stocks such as Bank of America Corp (NYSE:BAC), Wells Fargo & Co (NYSE:WFC), JPMorgan Chase & Co. (NYSE:JPM), PNC Financial Services (NYSE:PNC) and U.S. Bancorp (NYSE:USB) gained 3.0%, 1.3%, 2.3%, 3.1% and 1.6%, respectively.