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Hopes that central banks on both sides of the Atlantic would introduce fresh economic measures and strong corporate results helped benchmarks post their third-straight day of gains. While the Dow had been trading over its psychological level for the last few days, the S&P 500 and Nasdaq also crossed their individual key levels. The energy sector showed particular strength yesterday.
The Dow Jones Industrial Average (DJI) jumped 0.4% and ended the day at 13,168.60. The Standard & Poor 500 (S&P 500) gained 0.5% and finished yesterday’s trading session at 1,401.35. The tech-laden Nasdaq Composite Index jumped 0.9% and closed at 3,015.86. The fear-gauge CBOE Volatility Index (VIX) added a mere 0.3% to settle at 15.99. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.39 billion shares; lower than the last year's daily average of 7.84 billion. Advancing stocks outpaced the decliners on the NYSE; as for 63% stocks that gained, 34% stocks closed lower.
Benchmarks have been rallying for the past three days and the statistical landmarks that they achieved have provided much cheer to investors. This includes the Dow’s first rise on a Monday after a gloomy run of losing out on a finish in the green for nine consecutive Mondays. Mondays’ gains had also lifted benchmarks to three-month highs. However, the real credit for the benchmarks’ uptrend goes to Friday’s robust gains, which came on the heels of better-than-expected nonfarm payroll data. Also, Friday’s gains had taken the Dow back over its key psychological level.
Getting into the numbers for yesterday, there were many positives for investors. The S&P 500 ended the flirtation with its key level to finally cross and settle above the 1, 400 mark. The Nasdaq too shared the laurels, closing over 15 points higher than its psychological level of 3, 000. Both of these benchmarks crossed their individual highs for the first time since early May. Meanwhile, with yesterday’s gains, the Dow is just about 100 points short of chalking up a four-and-half year high.
Investors have received a much needed boost from strong nonfarm payroll data released by the government last Friday. Market watchers believe that the strong numbers do not in any way deter the chances of the central bank considering a third round of quantitative easing (QE3). The unemployment rate rose to 8.3% from 8.2% and market sentiment believed this development has kept the door open for QE3.
Incidentally, one of the major the reasons for the markets’ uptrend yesterday – comments by the President of Federal Reserve Bank of Boston, Eric S. Rosengren, about the need for the central bank to pursue new round of bond purchases reflected the effect of employment data. In an interview with the Wall Street Journal, Eric Rosengren’s comments mirrored market sentiments about the jobs report. He commented: “You continue to do it until you have documented evidence that you’re getting growth in income and the unemployment rate consistent with your economic goals”.
While investors garnered fresh hopes from the statement of the Boston Fed chief, hopes for action by the central bank lingered on at the other side of the Atlantic as well. European Central Bank head Mario Draghi might had not lived up to his vow of doing “whatever it takes” to preserve the Euro-zone, at least for the moment, but sentiment is generally positive in Europe. Spanish and Italian bond yields have eased significantly and equity markets have also shown strength. Thus, hopes of ECB springing into action might be alive and that is helping the markets.
Corporate results also joined the party yesterday to aid the markets’ uptrend. Fossil, Inc. (NASDAQ:FOSL) was a major name in helping to improve the mood as its earnings numbers and encouraging guidance boosted the company’s shares by 31.5%. Also, Chinese medical devices bellwether Mindray Medical International’s (NYSE:MR) second-quarter 2012 earnings outpaced the estimates and revenues were over 23% higher than the year-ago quarter. Mindray’s shares soared 11.5%. Separately, Sirius XM Radio Inc’s (NASDAQ:SIRI) shares added 4.6% following a record-setting second quarter. The company’s revenue, free cash flow, and net subscriber additions were at record highs.
Separately, shares of Chesapeake Energy Corporation (NYSE:CHK) jumped 9.4%, thanks to the company’s earnings results and its plan to sell assets. The gains aided the energy sector as well and the Energy Select Sector SPDR (ETF) (XLE) gained 1.5%. Among other energy shares, ConocoPhillips (NYSE:COP), BP plc (ADR) (NYSE:BP), Marathon Oil Corporation (NYSE:MRO), Hess Corp. (NYSE:HES) and Western Refining, Inc. (NYSE:WNR) surged 1.0%, 2.5%, 2.6%, 2.4% and 2.2%, respectively.