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Stock Market News for June 18, 2013

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Benchmarks chalked up gains on speculation that the Federal Reserve will implement policies in favor of strengthening the economic recovery. Meanwhile, home prices in China increased at its fastest pace in May to a two year high. Additionally, wages in Germany have increased to a four year high in the first quarter and  the Euro Zone returned impressive export figures for the month of April. All the top ten S&P 500 industry groups finished in the green, among which energy stocks were the biggest gainers.

The Dow Jones Industrial Average (DJI) gained 0.7% to close the day at 15,179.92. The S&P 500 increased 0.8% to finish yesterday’s trading session at 1,639.09. The tech-laden Nasdaq Composite Index rose 0.8% to end at 3,452.13. The fear-gauge CBOE Volatility Index (VIX) decreased 2% to settle at 16.80. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.24 billion shares, well below 2013’s average of 6.36 billion shares. Advancing stocks outnumbered the decliners. For the 65% that advanced, 32% declined.

Volatility has come into play since Bernanke said the $85 billion bond purchase program might be slowed or ended in the “next few meetings” of the Federal Reserve. Major indices have been on a bumpy road since then. Yesterday, speculation that Fed will announce policies in favor of economic growth have acted as a catalyst. Positive U.S. Homebuilders sentiment and NY Empire State Index added fuel to investor sentiment. The two-day meeting of the Federal Reserve and Fed Minutes due for release on Wednesday will probably decide the trajectory of major indices going forward.

On the domestic front, according to the Empire State Manufacturing Survey for June, the general business conditions index surged 9 points to 7.8. However, new orders, shipments and unfilled orders indices witnessed sharp declines falling to -6.7, -11.8 and -14.5, respectively. Price paid index was unchanged at 21.0 while price received index increased 7 points to 11.3.

On the international front, according to the National Bureau of Statistics (NBS) and Reuters, home prices in 70 cities in China increased by 6%. This increase has been at its fastest pace in past two years and follows an increase of 4.9% in April. A series of Chinese economic reports released in May support the fact that economic growth is slowing down. On the other hand, rising Chinese house prices have rekindled worries over property inflation. Consistent steps taken by the government, in March, to “cool” inflation have failed. Among the major cities, housing prices in Beijing and Shanghai increased 11.8% and 10.2% from year-ago figures.

German wages increased at its fastest pace in the last four years. Euro Zone’s largest economy may be finally seeing an end to a long recession. According to Eurostat, basic labor costs increased 3.9% in Germany for the first three months in 2013. This increase is well above the regional increase of 1.6%. Meanwhile, Euro Zone exports increased 9% in April while imports inched up 1%. Export figures have helped the region accumulate a trade surplus of 14.9 billion euros. Recession-ridden Spain witnessed an increase of 3% in exports while labor cost declined 0.7% in the first quarter.

U.S. Homebuilders sentiment increased above 50 to 52 for the first time in 7 years. This is significantly higher than the figure of 44 recorded in April. Shares of companies such as Toll Brothers Inc. (NYSE:TOL), KB Home (NYSE:KBH), D.R. Horton, Inc. (NYSE:DHI), The Ryland Group, Inc. (NYSE:RYL) and PulteGroup, Inc. (NYSE:PHM) increased 2.4%, 1.7%, 1.6%, 2.0% and 2.7%, respectively.

All the top ten S&P 500 industry groups finished in the green among which, energy stocks gained the most. The Energy Select Sector SPDR (XLE) gained 1.4%. Stocks such as Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), Hess Corp. (NYSE:HES), Murphy Oil Corporation (NYSE:MUR) and ConocoPhillips (NYSE:COP) gained 0.8%, 1.0%, 2.3%, 0.9% and 1.5%, respectively.

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