Markets registered their first back-to-back gains this month, as industrial and material stocks helped push the benchmarks higher. The trading session was significantly calm compared to the high levels of volatility that the markets endured since early last month. For the first time since July 26, the Dow traded in a narrow range of a little over 150 points. Hopes about European leaders taking steps to resolve the Greek debt crisis also helped the markets’ uptrend.
The Dow Jones Industrial Average (DJIA) gained 0.4% and finished the day at 11,105.85. The Standard & Poor 500 (S&P 500) was up 0.9% and settled at 1,172.87. The Nasdaq Composite Index closed at 2,532.15, after gaining 1.5%. The fear-gauge CBOE Volatility Index hovered around 38, reflecting lingering fears among investors. Consolidated volumes on the New York Stock Exchange, Amex and Nasdaq were 7.8 billion shares, compared with last year's average of 7.6 billion. For every four stocks that gained on the NYSE, only one showed a downward movement.
While investors looked to cash in on beaten down stocks, all of the 10 industry groups in the S&P 500 finished with gains and the industrials and materials were the top performing sectors in the S&P 500. The gains in these sectors led to the rally in the broader markets and the Industrial Select Sector SPDR (XLI) and Materials Select Sector SPDR (XLB) posted gains of 1.9% and 1.7%, respectively.
Among industrial shares, Cummins Inc. (NYSE:CMI), Caterpillar Inc. (NYSE:CAT), Deere & Company (NYSE:DE), Astec Industries, Inc. (NASDAQ:ASTE) and Columbus McKinnon Corporation surged 5.9%, 1.4%, 2.0%, 3.8% and 3.0%, respectively. Gainers in the material sectors include Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), General Moly, Inc. (AMEX:GMO), Taseko Mines Ltd. (AMEX:TGB) and HudBay Minerals, Inc. (NYSE:HBM) and they were up 1.7%, 3.3%, 1.5% and 2.0%, respectively.
Also contributing to the gains of the broader markets were technology stocks. Bellwethers like Oracle Corp. (NASDAQ:ORCL), Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Cisco Systems, Inc. (NASDAQ:CSCO), Dell Inc. (NASDAQ:DELL) and Intel Corporation (NASDAQ:INTC) gained 3.6%, 1.2%, 0.6%, 1.6%, 1.3% and 2.4%, respectively.
Debt concerns from the other side of the Atlantic, Europe, have dealt serious blows to the US indices for a considerable period now. Late last year, Ireland was hit by a debt crisis and thereafter other European nations like Spain, Portugal and Greece joined the list. Fears had also gripped the markets that the continent’s third-largest nation, Italy, might soon be gripped by a severe debt crisis. However, a report in the Financial Times that the Italian government was in talks with China Investment Corp about the possible “significant buying of Italian bonds had led to a market rally in the final hours of Monday. However, according to latest reports, a source from the Italian government said contrary to expectations Chinese investments will actually be focused on Italian industrial assets.
Encouraging news about the euro debt situation has come in fits and starts, providing markets with temporary relief. Likewise, investors pinned their hopes yesterday on the possibility of Euro leaders working towards a solution to the Greek debt situation, which subsequently helped the markets in its uptrend. Investors hoped that some progress would be made during Wednesday’s conference call among German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou.
With not many significant economic reports lined up for the day, the little data that was released could hardly make any big impact on the markets’ movement. The Labor Department reported import prices had declined 0.4% in August, contrary to the 0.3% increase in July. However, economists had projected a 0.8% drop in import prices. The decline in import prices was led by a 1.8% drop in fuel prices. On the other hand, the US department of Labor reported that the prices for US exports gained 0.5% in August, compared with a 0.4% decline in July.
Separately, the National Federation of Independent Business (NFIB) reported that declining expectations for gains in retail sales and a discouraging business outlook for the next six months led to the 1.8-point drop in the small businesses optimism index which came in at 88.1 for the month of August.