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Benchmarks scaled a new high on Monday, riding on positive sentiment in the market. The Dow Jones continued rallying towards another record high despite the absence of any major economic reports and developments. The S&P 500 breached its highest intra-day level briefly while the CBOE Volatility Index was at its lowest level in more than six years. Among the top ten S&P 500 industry groups, the financial stocks emerged as the biggest gainer.

The Dow Jones Industrial Average (DJI) gained 0.4% to close the day at 14,447.29. The S&P 500 increased 0.3% to finish yesterday’s trading session at 1,556.22. The tech-laden Nasdaq Composite Index gained 0.3% to end at 3,252.87. The fear-gauge CBOE Volatility Index (VIX) dropped 8.2% to settle at 11.56. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.36 billion shares, well below the daily average of 6.48 billion shares. Advancing stocks outnumbered the decliners. For the 53% that advanced, 43% declined.

The Dow and the S&P 500 finished in the green owing to positive investor sentiment. The Dow and the S&P 500 have increased 10% and 9%, respectively this year. Since breaking a record high last Tuesday, the Dow has increased about 2% following encouraging economic data on employment and initial claims. The Federal Reserve’s continued support towards economic stimulus also added fuel to investor sentiment. The S&P 500 is just 10 points short of breaching its all time high. On Monday, the index touched its highest intraday level of 1,556.27 briefly. This figure was achieved on October 15, 2007.

On the international front, industrial output data released by China reflects a poor start this year, the weakest since 2009. Industrial output data came in at 9.9%, below the consensus estimate of 10.3%. Apart from industrial output, growth in lending and retail sales was also weak. In the first two months, production increased 9.9% while retail sales grew 12.3%. Retail sales data came in below market estimates of 15%.

Meanwhile, Italy faced a downgrade in light of poor economic growth and unstable political conditions. Fitch downgraded Italy to a BBB+ rating from A -. Fitch also said Italy’s prospects are negative; hence, further downgrades are possible. According to the ratings firm: “The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amidst the deep recession.”

On the earnings front, shares of Dicks Sporting Goods Inc. (NYSE:DKS) plunged about 11% after it posted revenues and earnings below the Street’s estimates. The company also said it expects revenues for the first quarter of 2013 would fall significantly. Dicks Sporting added that reducing inventories in December adversely affected sales of cold-weather clothes in January.

Financial stocks were the biggest gainers among the top ten S&P 500 industry groups. The Financial Select Sector SPDR (XLF) gained almost 0.8%. Stocks such as JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), Citigroup Inc. (NYSE:C), Bank of America Corp (NYSE:BAC) and Goldman Sachs Group, Inc. (NYSE:GS) increased 0.6%, 1.7%, 2.0%, 0.7% and 0.2%, respectively.

The Materials sector also had a good run and the Materials Select Sector SPDR (XLB) gained 0.6%. Stocks such as Alcoa Inc (NYSE:AA), E I Du Pont De Nemours And Co (NYSE:DD), The Dow Chemical Company (NYSE:DOW), Monsanto Company (NYSE:MON) and FMC Corp (NYSE:FMC) increased 0.7%, 0.4%, 0.7%, 0.8% and 0.4%, respectively.

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