Stock Market News for March 2, 2012

Encouraging domestic economic data and the massive monetary injection by the European Central Bank (ECB) lifted the benchmarks modestly higher on Thursday. The day was somewhat marred by dismal economic data and news of explosion on an unknown Saudi oil pipeline. However, investors preferred the positives and the markets did finish in the green though it came down from its day’s highs.

The Dow Jones Industrial Average (DJI) gained 0.2% and closed at 12,980.30. The Standard & Poor 500 (S&P 500) moved up 0.6% to finish yesterday’s trading session at 1,374.09. The tech-laden Composite Index enjoyed strong gains of 0.7% and settled at 2,988.97. The fear-gauge CBOE Volatility Index (VIX) plunged 6.4% and settled at 17.26. Consolidated volumes on the New York Stock Exchange, NYSE Amex and Nasdaq were 7 billion shares, which were in line with the daily average volumes. On the NYSE, for every couple of stocks that advanced, a single stock dropped into the negative territory.

Investors would always be happy to know about an improving employment situation. A drop in unemployment bodes well for the economy and subsequently the investors’ cheer is reflected through the benchmarks. Since late December last year, investors have mostly been receiving good news from the labor front, and it was no exception yesterday. The U.S. Department of Labor reported that the advance figure for seasonally adjusted initial claims for the week ending February 25, dropped to 351,000, thus a decline of 2,000 from the previous week's revised figure of 353,000. The drop was also slightly larger than consensus estimates, which predicted the initial claims to be 352, 000.

While the labor market boosted the sentiment, a modest increase in personal income also added to the cheer. The Bureau of Economic Analysis reported that Personal income increased 0.3% and disposable personal income (DPI) increased 0.1% in January.

Cross-Atlantic developments looked positive yesterday with declining fears about a meltdown in banking sector. The ECB injected a massive $712.2 billion into commercial banks. This was the second time ECB injected money, aiming to buoy the banking sector. In ECB’s history, this was the largest single refinancing activity.

Following this development, the financial sector emerged as one of the leading gainers for the day with Financial SPDR Select Sector Fund (XLF) gaining 1.1%. The KBW Bank Index (BKX) also gained 1.1% and bellwethers like Bank of America (NYSE:BAC), Citigroup, Inc. (NYSE:C), JP Morgan Chase & Co. (NYSE:JPM), The Goldman Sachs Group, Inc. (NYSE:GS), Deutsche Bank AG (NYSE:DB) and Barclays PLC (NYSE:BCS) posted robust gains of 1.9%, 2.4%, 2.9%, 5.2%, 2.5% and 3.1%, respectively.

However, the day’s gains were limited by some dismal economic reports that included a downtrend in manufacturing activity and a drop in construction spending. The ISM Manufacturing Index, which is considered the king of all manufacturing indices, had dismal figures to share with the investors as it reported a slower pace of growth. The Institute for Supply Management Manufacturing Business Survey Committee said that the PMI decreased 1.7 percentage points from January's reading to 52.4 in February. Also, the New Orders Index declined 2.7 percentage points from January's reading to 54.9 percent.

Separately, the U.S. Census Bureau of the Department of Commerce reported that the construction spending during January 2012 dropped 0.1% from the revised December estimate of $827.6 billion to a seasonally adjusted annual rate of $827.0 billion. Spending on private construction remained almost flat and the seasonally adjusted annual rate of public construction spending dropped 0.2%.

Markets also lost some of its gains owing to media reports of an explosion on an unknown oil pipeline of Saudi. Brent crude sprung to $126.20 per barrel. However, the report was later denied by Saudi oil official. Nonetheless, the news had done some damage to the benchmarks and the news came around 40 minutes before the markets’ close. The energy sector gained some points and the Energy SPDR Select Sector Fund (XLE) inched up by almost a percent and shares including National Oilwell Varco, Inc. (NYSE:NOV), Schlumberger (NYSE:SLB), Baker Hughes Incorporated (NYSE:BHI) and Devon Energy (NYSE:DVN) increased 1.9%, 1.0%, 1.0% and 1.1%, respectively.