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On Friday, U.S. markets inched up to close in the green with the S&P 500 recording its highest rally since July 2011. Hopes of EU overcoming its sovereign debt crisis gathered strength after Treasury Secretary Timothy Geithner said US would join other EU leaders to seek out a solution to the euro zone debt situation. Markets further rose on news that United Technologies Corporation is looking to finance a major U.S. acquisition.
The Dow Jones Industrial Average (DJIA) gained 0.7% or 75.91 points and finished the day at 11,509.09 marking its longest winning streak since 1st July. For the week, the blue chip index rose 4.7%. The Standard & Poor 500 (S&P 500) was up 0.6% and settled at 1,216.01 with telecom and utilities emerging as the biggest gainers while energy stocks were the biggest losers. The index gained 5.4% for the week recording its third biggest weekly gains since 2009. The tech laden Nasdaq Composite Index closed at 2,622.31, after gaining 0.6%. The CBOE Volatility Index (VIX) which is considered as the fear gauge in market closed at 30.98. Consolidated volumes on the New York Stock Exchange, Amex and Nasdaq were recorded at 4.8 billion shares, with 1.8 billion were traded on the NYSE.
Encouraging news about the euro debt situation has finally come in and provided much needed relief to the investors. Jean-Claude Trichet, president of the European Central Bank asked all member nations to slash their respective budgets. Separately, EU economic consumer affairs commissioner, Olli Rehn said he expects new and tougher eurozone-wide budget rules to be implemented by the beginning of next year. Moreover, the US Treasury Secretary has separately called on European finance ministers and has suggested a two day meeting be held with ministers in Poland to discuss the debt crisis. Earlier on Thursday, stocks gained after the ECB and Fed along with other central banks announced coordinated action to tackle the debt situation in Europe. “Thursday’s pledge by the European Central Bank, alongside similar commitments from the Bank of England, the Bank of Japan and the Swiss National Bank that it will offer three-month US dollar funding over year-end, brought some relief to markets and banking stocks in particular, said economists at Capital Economics.
On the economic front, there were no significant reports lined up for the day that could have impacted investor sentiment. The only report to be released was Net Foreign Purchases for July which showed a reading of 9.5 against the expectations of 15. Foreign residents increased their holdings of long-term U.S. securities in July — net purchases were $24.6 billion. Net purchases by private foreign investors were $10.4 billion, and net purchases by foreign official institutions were $14.2 billion. At the same time, U.S. residents increased their holdings of long-term foreign securities, with net purchases of $15.1 billion. Separately, a study conducted by Reuters and Michigan university showed that The Thomson Reuters/University of Michigan preliminary index of consumer sentiment has increased to 57.8 in September from 55.8 in August.
Contributing to the gains of the broader markets were airlines and aerospace stocks following news of a possible financing of a major U.S. acquisition by United Technologies Corp (NYSE:UTX) which can go well above $20 billion. However, a spokesperson of United Technologies declined to comment on the matter. Aircraft maker Textron (NYSE:TXT) gained 22.10% after the company announced it would swap its convertible debt for straight debt. Shares of Rockwell Collins (NYSE:COL) and Tyco International (NYSE:TYC) advanced 7.81% and 3.11% to close at $56.21 and $43.70 respectively.
Restricting the gains in the market were shares from the energy sector. Shares of the world’s largest provider of oilfield-services Schlumberger Ltd. (NYSE:SLB) dropped 1.86% to close at $72.84. Other energy stocks like Sunoco (NYSE:SUN), Williams Companies (NYSE:WMB), Marathon Oil (NYSE:MRO) and Alon USA Energy (NYSE:ALJ) declined by 2.32%, 0.73%, 1.40% and 2.32% respectively to close in the red. Likewise, share prices of Research In Motion (NASDAQ:RIMM) plunged 19% to $23.93 after the blackberry phone maker missed analysts estimates of its sales figures for both the Blackberry and Playbook tablets.
Coming to individual stocks, Amazon.com (NASDAQ:AMZN), Procter & Gamble (NYSE:PG), Diamond Foods (NASDAQ:DMND) and Barnes & Noble (NYSE:BKS) surged 5.52%, 2.47%, 11.59% and 2.32% respectively. Bellwethers like Oracle Corp. (NASDAQ:ORCL), Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Intel Corporation (NASDAQ:INTC) all gained 0.97%, 1.92%, 0.48% and 2.0% to end in the green.
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