Benchmarks posted marginal gains on Friday following better-than-expected results of few banking companies. Meanwhile, Fitch downgraded France’s credit rating from AAA to AA+. According to U.S. and European policymakers, talks towards implementing bilateral free trade have started on a good note. Of the top ten S&P 500 industry groups, health care stocks gained the most, while, industrials stocks suffered the most.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) gained 3.38 points to close the day at 15,464.30. The S&P 500 added 0.3% to finish Friday’s trading session at 1,680.19. The tech-laden Nasdaq Composite Index rose 0.6% to end at 3,600.08. The fear-gauge CBOE Volatility Index (VIX) declined 1.2% to settle at 13.84. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.4 billion shares, below 2013’s average of 6.4 billion shares. Declining stocks marginally outnumbered the advancers. For the 49% that declined, 48% advanced.
Following Bernanke’s testimony in May, benchmarks lost about 6%. However, they have recovered losses to a great extent in the past three weeks. Sentiment was boosted by the fact that policy makers are against tapering of bond purchase program since they want to see further improvement in the employment scenario. The S&P 500 and the Dow Jones have touched all-time high levels. Investor optimism gained ground on the back of assurances given by the Federal Reserve.
On the domestic front, the University of Michigan and Thomson Reuters' Consumer Sentiment Index for July came in at 83.9 below the consensus estimate of 83.9 and previous month’s figure of 84.1. According to another report released by the U.S. Department of Labor, the Producer Price Index (PPI) for finished goods increased 0.8% in June, above the consensus estimates of 0.5%. PPI or the month of May had increased 0.5% while the index decreased 0.7% for April. Increase in gasoline prices is largely responsible for the increase in the Index.
Translantic trade talks initiated last week have started on a good note. Policymakers expect to improve the employment scenario by abolishing tariffs and regulatory barriers on goods exported from both countries to boost the economy. They plan to abolish taxes on most goods ranging from chemicals to agriculture and also services. The next meeting is expected to take place in October at Brussels. The deal is expected to be concluded by late-2014.
On the international front, credit rating agency Fitch has downgraded France from AAA to AA+. France has already been downgraded by credit rating agencies like Stand & Poor and Moody’s after it entered the recession in first quarter of 2013. The downgrade came in light of a surge in unemployment rate, low economic growth, increase in budget deficit and weak external demand. The GDP of France is expected to decline 0.3% in 2013 and increase 0.6% the following year. For 2012, the country’s GDP ended flat.
On the earnings front, shares of JPMorgan Chase & Co. (NYSE:JPM) declined marginally, by 0.3%, after its second quarter results beat the Street’s expectations. Quarterly profit surged 31%. Growth in the Investment banking business is responsible for the company’s higher profits.
The health care sector gained the most. The Health Care SPDR (XLV) gained 0.6%. Stocks such as Pfizer Inc. (NYSE:PFE), Mylan Inc. (NASDAQ:MYL), Amgen, Inc. (NASDAQ:AMGN), Johnson & Johnson (NYSE:JNJ) and Merck & Co., Inc. (NYSE:MRK) increased 0.1%, 2.1%, 1.0%, 0.4% and 0.5%, respectively.
Industrials stocks suffered the most. The Industrials SPDR (XLI) lost 0.6%. Stocks such as General Electric Company (NYSE:GE), The Boeing Company (NYSE:BA), United Parcel Service, Inc. (NYSE:UPS), Danaher Corporation (NYSE:DHR) and Precision Castparts Corp. (NYSE:PCP) lost 0.8%, 4.7%, 5.8%, 0.2% and 1.1%, respectively.