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After suffering a slump last week, commodities made a strong comeback yesterday and lifted the benchmarks higher. Energy shares joined in on the uptrend as crude prices once again rose above $100 per barrel. Meanwhile fresh worries about Greece’s credit ratings partially limited gains.
The Dow Jones Industrial Average (DJIA) rose 0.4% to close at 12,684.68. The Standard & Poor 500 (S&P 500) gained 0.5% and finished the day at 1,346.29. The Nasdaq Composite Index increased 0.6% to settle at 2,843.25. The fear-gauge CBOE Volatility Index dropped down to almost 17. On the New York Stock Exchange, composite volumes were low, at only 3 billion shares. For every couple of stocks that gained, one stock moved down.
Markets witnessed a massive sell off of commodities last week as investors chose to take the exit route, unnerved by volatility. Crude prices dropped below the $100 per barrel mark for the first time since mid-March. Stocks had to shoulder the consequences and benchmarks inched down by more than 1%. Silver plunged 27% and oil shed 15%. However, markets moved up yesterday, riding on rising commodity and crude prices. Silver gained 5.2% while gold moved up 1%. Producers of metals and other materials were the second best performers for the S&P 500 and gained 1.5%.
U.S. light crude jumped 5.5% to settle at $102.55 per barrel in New York. Subsequently, the energy index moved higher as energy companies gained 2% to post the highest increase among the 10 industries in the S&P 500. Shares of over 90% of the energy companies moved up, including ConocoPhillips (NYSE: ( COP - Analyst Report ) , Exxon Mobil Corporation (NYSE: ( XOM - Analyst Report ) , Chevron Corp. (NYSE: ( CVX - Analyst Report ) , Baker Hughes Incorporated (NYSE: ( BHI - Analyst Report ) , Halliburton Company (NYSE: ( HAL - Analyst Report ) , Marathon Oil Corporation (NYSE: ( MRO - Analyst Report ) , Frontier Oil Corp. (NYSE: ( ) , Holly Corporation (NYSE: ( ) , Stone Energy Corp. (NYSE: ( SGY - Analyst Report ) . These shares jumped 1.1%, 0.6%, 1.2%, 3.4%, 3.0%, 5.3%, 6.7%, 7.1% and 5.0%, respectively.
A host of deals also aided the markets’ upward movement. Alkermes, Inc. (NASDAQ: ( ALKS - Analyst Report ) inked a deal with Elan Corporation (NYSE: ( ELN - Snapshot Report ) to buy the latter’s Elan Drug Technologies (EDT) segment, which is its drug delivery unit. Expected to close in the third quarter of calendar 2011, this merger is worth approximately $960 million. The merged entity will be known as Alkermes plc and will be headquartered in Dublin, Ireland. This deal is expected to boost Alkermes’ cash earnings immediately following its closure and has been cleared by the board of directors of both companies. Shares of Alkermes jumped 5.0% and Elan Corp. climbed 4.8%.
In other news, Hertz Global Holdings, Inc. (NYSE: ( HTZ - Snapshot Report ) offered to buy Dollar Thrifty Automotive Group Inc. (NYSE:DTG) in a cash and stock deal worth $72 a share. For every Dollar Thrifty share, Hertz offered $57.60 in cash and 0.8546 of its own shares. Shares of Hertz went down 1.0% but shares of Dollar Thrifty soared 13.8%. Meanwhile, NVIDIA Corporation (NASDAQ:NVDA) entered into an all cash deal worth $367 million to acquire designer of baseband processors, Icera. Shares of NVIDIA were up 2.2%.
On the international front, the euro-zone crisis resurfaced to unnerve the benchmarks and limited gains to an extent. Fueling euro-zone debt concerns, Standard & Poor’s Ratings Services downgraded Greece’s credit rating. Greece’s credit rating was downgraded to C and B from B and BB- for the short and long term, respectively. To add to the regions’ woes, Moody’s Investors Service is also reviewing Greece’s B1 local and foreign currency government bond ratings.
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