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Favorable results from the Greek elections failed to boost the markets through Monday’s session, as concerns over Spain’s borrowing costs overshadowed sentiments and benchmarks ended mixed. The technology sector nonetheless enjoyed a decent rally and that helped the Nasdaq end sufficiently higher. But the S&P 500 managed only meager gains and the Dow was left languishing in the red.
The Dow Jones Industrial Average (DJI) halted its two-day winning rally and dropped 0.2% to end at 12,741.82. The Standard & Poor 500 (S&P 500) edged up 0.1% and settled slightly higher at 1,344.78. The tech-laden Nasdaq Composite Index jumped 0.8% to finish yesterday’s trading session at 2,895.33. The fear-gauge CBOE Volatility Index (VIX) slumped 13.2% and declined sharply to 18.32. Consolidated volumes on the New York Stock Exchange, the American Stock Exchange and Nasdaq were roughly 5.78 billion shares, lower than last year's daily average of 7.84 billion. The advancers outnumbered the declining stocks on the NYSE; as for 57% of stocks that gained, 40% stocks traded lower.
Markets opened on Monday after pro-bailout parties won the crucial Greece election over the weekend. With anti-bailout SYRIZA party not getting a majority, fears of Greek’s immediate exit from the euro subsided for the moment. However, while some focused on news of pro-bailout parties winning the election, the larger concern was that the New Democracy party had just managed only a narrow victory and the anti-bailout party did garner a large chunk of votes. The New Democracy party will now have to woo other parties and form a significant majority. Investors across the globe have been jittery about Greece elections, since Greece’s chances of surviving within the currency union depended on it. Meanwhile, Antonis Samaras, leader of New Democracy, said while he was steadfast on the bailout package, there is need for some necessary amendments.
Thus, concerns continue to linger and investors can hardly take long-term comfort from these results. Their attention also turned to another Euro member, Spain. Spain has been struggling with higher borrowing costs over the past several days and had been approaching the ‘unsustainable’ 7% mark. This time, the 10-year bond yields of Spain did finally cross the 7% mark as it soared as high as 7.18%. It was the new euro-era high for Spain’s bond-yield, but what was more jittery was that nations including Greece, Ireland and Portugal had to seek a bailout when there bond yields crossed the 7% ‘unsustainable’ mark. Things are not comfortable either in Italy and Cyprus.
Thus, cross-Atlantic tensions lingered on to dampen sentiments yet again. The financial sector is susceptible to developments on these fronts, and yesterday the Financial Select Sector SPDR (XLF) dropped 0.6%. Among financial stocks, Bank of America Corporation (NYSE:BAC), Citigroup, Inc. (NYSE:C), The Goldman Sachs Group, Inc. (NYSE:GS), Morgan Stanley (NYSE:MS) and UBS AG (NYSE:UBS) slumped 1.8%, 2.7%, 2.1%, 3.4% and 2.0%, respectively.
However, the technology sector had a strong run yesterday mostly buoyed up by Facebook, Inc. (NASDAQ:FB) and Groupon, Inc. (NASDAQ:GRPN), which jumped 4.7% and 10.8%, respectively. While the Technology Select Sector SPDR (XLK) jumped 0.7%, and stocks including Apple Inc. (NASDAQ:AAPL), Google Inc. (NASDAQ:GOOG), NVIDIA Corporation (NASDAQ:NVDA) and Broadcom Corp. (NASDAQ:BRCM) gained 2.0%, 1.1%, 0.9% and 1.1%, respectively. Gains in tech sector were instrumental in guiding the Nasdaq index to the positive zone.
Therefore, investors yesterday remained on the edge, as they await crucial meetings this week. The Group of 20 is due to meet soon and investors will be keenly watching their every move, particularly on the euro-zone debt situation. Also, the Federal Open Market Committee will meet this week, and investors are expecting some announcement regarding monetary policy.
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