Stocks chalked up gains for the second consecutive day banking on robust domestic auto sales numbers and encouraging news on the economy. Yesterday’s gains lifted the Dow Jones higher and the index logged its best day in more than a month. A positive Fed Beige Book report further lifted investor sentiment. The report showed that the U.S. economy grew at “modest to moderate” pace in the early part of July to late August. On the other hand, the U.S. trade deficit increased more than expected in July. Most of the sectors in the S&P 500 industry groups finished in the green led by consumer discretionary, technology and financial stocks.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street
The Dow Jones Industrial Average (DJI) gained 0.7% to close the day at 14930.87. The S&P 500 added 0.8% to finish yesterday’s trading session at 1653.08. The tech-laden Nasdaq Composite Index increased 1.0% to end at 3649.04. The fear-gauge CBOE Volatility Index (VIX) declined 4.4% to settle at 15.88. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.1 billion shares, below 2013’s average of 6.3 billion shares. Advancing stocks outnumbered the decliners. For 69% shares that advanced, only 29% declined.
In recent days, markets have received a series of encouraging domestic reports about the U.S economy. But apart from yesterday’s strong gains, markets have not performed well due to the situation in Syria. On Friday, the widely awaited non-farm payrolls report is scheduled to be released. This report will serve as an important cue regarding the path the central bank may take with respect to the future of its massive bond buying program.
According to San Francisco Fed President John Williams, the Fed should start trimming its bond buying program later this year and should end the program by mid-2014. He also said economic growth will increase in the second half of 2013. He believes that inflation-adjusted gross domestic product will register a growth of 2% and 3% in 2013 and 2014, respectively. But he doesn’t expect unemployment to touch 6.5% before the first half of 2015.
The most encouraging news of the day which lifted the major indices higher was robust auto sales for the month of August. August was the best month for the auto industry in terms of sales. Vehicles sales jumped 17% in August. Sales of leading auto makers companies like Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) jumped 12% and 15%, respectively. Toyota Motor Corporation’s (NYSE:TM) sales increased nearly 23%.
According to the Federal Reserve's Beige Book, the U.S. economy grew at a “modest to moderate” in recent months. Eight districts reported moderate growth while the remaining four posted modest growth. Consumer spending increased in most of the districts due to an increase in the demand for automobiles and housing related goods. Manufacturing activity increased modestly.
Another important report pertaining to the home front was released. According to the Commerce Department, U.S trade deficit climbed 13.3% to $39.1 billion in July from the previous month’s figure of $34.5 billion. This was above the consensus estimate of a trade deficit of $38.5 billion. Exports in the month of July came in at $189.4 billion and imports at $228.6 billion.
The consumer discretionary sector was the biggest gainer among the S&P 500 industry groups and the Consumer Discretionary SPDR (XLY) gained 1.1%. Stocks such as the Home Depot, Inc. (NYSE:HD), CBS Corporation (NYSE:CBS), Time Warner Inc (NYSE:TWX), Comcast Corporation (NASDAQ:CMCSA) and Time Warner Cable Inc (NYSE:TWC) added 0.3%, 2.1%, 1.0%, 0.8% and 0.6%, respectively.