Markets ignored apprehensions arising out of political changes in Greece and France, and but for the Dow, the benchmarks ended in positive territory. Gains were meager for the S&P 500 and Nasdaq, but these benchmarks managed to recover from the day’s losses. The Dow had entered the green during the afternoon before settling modestly lower. Financials were among the day’s biggest gainers, accompanied by homebuilders.
The Dow Jones Industrial Average (DJI) dropped 0.2% to close at 13,008.53. The Standard & Poor 500 (S&P 500) edged up 0.04% to finish yesterday’s trading session at 1,369.58. The tech-laden Nasdaq Composite Index moved up 0.05% to 2,957.76. The fear-gauge CBOE Volatility Index (VIX) lost 1.2% and settled at 18.94. Consolidated volumes on the New York Stock Exchange, the Nasdaq and the American Stock Exchange were 6.28 billion shares, lower than the daily average of roughly 6.76 billion shares. Advancing stocks edged past the decliners on the NYSE, as for every eight stocks that advanced, seven stocks moved down.
Last Friday, markets suffered a heavy slump, heralding the benchmarks’ worst weekly performance. While disappointing jobs data dampened sentiment on Friday, a lot of selling pressure was created by the apprehensions of the investors, who cautiously waited for the outcome of the presidential election in France. Greece too was going for elections over the weekend. These political events kept the investors on their toes last Friday.
However, after results confirmed Nicolas Sarkozy’s defeat, investors shrugged of this development after an initial bout of selling. Markets opened with news that Francois Hollande had taken over as France’s president winning this crucial round of elections. A lot would depend on the outcome of these elections, as markets believed these results would ascertain the next course of action regarding the lingering Euro-zone crisis. All eyes were particularly fixed on Sarkozy, who has been a key Euro-zone figure in this regard, attending, discussing and deciding in coordination with other political heads on ways to rescue Europe from its lingering debt woes and save the shared currency from collapsing. He has been instrumental in dealing with strict austerity norms, and his ouster leaves the fate of such economic measures uncertain.
Additionally, Greece too showed their displeasure against the ruling party and their austerity measures. None of the parties managed a majority in Greece and that only increased the uncertainty about how the nation would tackle its financial problems.
Benchmarks opened lower, but started recouping the losses during the afternoon and the S&P 500 and Nasdaq each garnered a seat in the green. The blue-chip index too had turned positive for a while, but failed to hold on to the gains and dropped slightly lower. Moving back to France, the new president, Francois Hollande said that his win was against the Germany-led austerity measures and said: "In all the capitals... there are people who, thanks to us, are hoping, are looking to us, and want to reject austerity". He further commented: "I'm sure in a lot of European countries there is relief, hope that at last austerity is no longer inevitable". He struck a note of optimism which lifted the spirit of some investors, and benchmarks eventually recouped their losses.
Coming to sectoral stocks, financials were amongst the strongest performers, with the Financial Select Sector SPDR (XLF) moving 0.6% higher and KBW Bank Index (BKX) inching up by a percent. As for the financial bellwethers, Bank of America Corporation (NYSE:BAC), Morgan Stanley (NYSE:MS), The Goldman Sachs Group, Inc. (NYSE:GS), Wells Fargo & Company (NYSE:WFC) and U.S. Bancorp (NYSE:USB) gained 2.8%, 0.9%, 1.0%, 1.4% and 0.5%, respectively.
Joining the financial sector was the homebuilder sector and the PHLX Housing Sector (HGX) gained 0.9%. As for the stocks, Toll Brothers Inc. (NYSE:TOL), Lennar Corp. (NYSE:LEN), Hovnanian Enterprises Inc. (NYSE:HOV), PulteGroup, Inc. (NYSE:PHM) and DR Horton Inc. (NYSE:DHI) were up 1.3%, 0.9%, 4.1%, 0.6% and 1.0%, respectively.