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Stock Market News for March 1, 2011
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A reduction in inflated crude prices, optimistic comments from the President of the Federal Reserve Bank of New York and mixed economic data helped markets edge higher on Monday. Higher indices for the month also ensured a third-straight monthly gain, building on the positive momentum gained at the start of the year.
On Monday, the fear gauge CBOE Volatility Index (VIX) slipped below 19 and indices edged ahead. The Dow Jones Industrial Average (DJIA) was up 0.8% and closed at 12,226.34. The Standard & Poor 500 (S&P 500) gained 0.6% to end at 1,327.22 and the Nasdaq finished the day at 2,782.27 with a 0.04% increase. For every two declining stocks on the New York Stock Exchange, three stocks moved higher and volumes stood at 1.2 billion shares.
The Dow rose 2.81%, S&P 500 increased 3.2% and Nasdaq gained 3.0% in February. This was the best performance by the Dow and S&P 500 for the month of February since 1998. The third-straight monthly gain came in despite geopolitical tensions that hurt indices for a while. The week ending February 25, 2011 was one of the worst performing weeks since November last year and was burdened by unrest in Libya and inflated oil prices. However, markets withstood geopolitical tensions and retained the positive momentum of the start of the year. This suggests that global fears can cause a plunge for a day or even a week, but the US economy has responded well and possesses the ability to withstand pressures over a longer duration. However, concerns still remain about anti-government demonstrations spreading through the nations of the Persian Gulf, which can push crude prices higher, thereby negatively impacting the global economy.
Crude-oil futures plunged from the recent 2.5 year record high as concerns over oil supply eased. Saudi Arabia and Kuwait seem to have initiated measures for overcoming any shortage caused by the unrest in Libya, which contributes 2% of the global daily output.
According to reports, Libya’s eastern port of Tobruk was reopened on Monday and a tanker was being loaded. Saudi Arabia and The Organization of the Petroleum Exporting Countries (OPEC) had said they would take steps to dilute any shortage in oil supply. Though OPEC members were not keen on any emergency meetings, Saudi Arabia, on the other hand, was willing to ramp up exports. Khalid Al Falih, Chief Executive of Saudi Aramco, one of the world’s largest state oil companies, said his company had met the additional requirements. Reportedly, Iranian oil minister Masoud Mirkazemi advised Riyadh not to take ‘hasty decisions’ regarding crude output. Iran and OPEC members are of the opinion that the inflation in crude prices is now a result of sentiment and not is not due to supply-demand factors.
On the domestic front, a statement by William Dudley, President of Federal Reserve Bank of New York helped keep bullish sentiments alive. He hinted that the Federal Reserve’s $600 billion bond-buying policy would continue despite inflationary pressures and surging commodity prices.
Coming to economic developments, a report from the Institute for Supply Management said U.S. economic activity rose to 71.2 in February and is at its highest level in 22.5 years. Income tax cuts helped personal income to increase 1.0% in February and it registered its largest increase since May 2009. However, even though personal income rose, the Commerce Department reported a weaker-than-expected growth in consumer spending. With income rising only 0.2%, it was the smallest increase in seven months of gains. In other news, the National Association of Realtors Pending Home Sales Index fell 2.8% to 88.9. The index came in below the revised estimate of 91.5 in December 2010. This is the second consecutive monthly decline and also marked its slowest pace since October 2010.
The technology sector was hit hard after UBS downgraded Amazon.com Inc. (NASDAQ:AMZN - Analyst Report) to a ‘neutral’ rating from a ‘buy’ and also reduced the target price. Shares of Amazon.com lost 2.2% and closed at $173.29. Other key tech stocks that felt the pressure were MEMC Electronic Materials Inc. (NYSE:WFR - Analyst Report), Micron Technology Inc. (NASDAQ:MU - Snapshot Report), NVIDIA Corporation (NASDAQ:NVDA - Analyst Report) and Intel Corporation (NASDAQ:INTC - Analyst Report) and they shed 6.2%, 2.7%, 1.9% and 1.8%, respectively. Gainers from the tech sector include Hewlett-Packard Company (NYSE:HPQ - Analyst Report) and 3M Co. (NYSE:MMM - Analyst Report).
Major energy stocks such as Chevron Corp. (NYSE:CVX - Analyst Report), Exxon Mobil Corp. (XOM), and Transocean Ltd. (NYSE:RIG - Analyst Report) edged higher. Among the decliners were First Solar, Inc. (NASDAQ:FSLR - Analyst Report), HSBC Holdings plc (NYSE:HBC - Analyst Report) and Salesforce.com (NYSE:CRM - Analyst Report) which shed 5.4%, 3.8% and 4.7%, respectively.
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