Benchmarks bolstered gains on Monday following upbeat trade and inflation data from China. Positive data from China indicated that the global economy is improving. As a result, investor sentiment received a boost. Investor apprehensions regarding an attack on Syria by the US also eased, adding to optimism. All top ten S&P 500 industry groups finished in the green, of which the material stocks gained the most.
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The Dow Jones Industrial Average (DJI) gained 0.4% to close the day at 15063.12. The S&P 500 added 1.0% to finish yesterday’s trading session at 1671.71. The tech-laden Nasdaq Composite Index increased 1.3% to end at 3706.18. The fear-gauge CBOE Volatility Index (VIX) declined 1.4% to settle at 15.63. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.67 billion shares, below 2013’s average of 6.25 billion shares. Advancing stocks outnumbered the decliners. For 77% shares that advanced, only 21% declined.
Benchmarks experienced their best trading session since August 1 on the back of strong trade data from China. Major indices have been oscillating between gains and losses for the past two weeks due to the possibility of a military strike by the US on Syria. However, these tensions also eased yesterday after Russia proposed a way to “prevent American aggression”. Russia suggested that Syria should surrender its chemicals weapons to international control. This proposal was received positively by the Syrian government. Earlier, investors were cautious since a US military strike on Syria could have directly affected crude oil prices. In light of recent developments, it seems improbable that a resolution in favor of a military strike on Syria will be vetted by US lawmakers.
Benchmarks gained nearly 1% after China disclosed positive trade data for the month of August. Chinese exports grew 7.2%, above expectations, while imports increased at 11.3%, below expectations. Trade surplus of the country came in at $28.6 billion. Exports to the US and the Euro Zone increased 6.1% and 2.5%, respectively. The highest volume of exports was witnessed in textiles, electronics and machinery. Shipments to the ASEAN nations spiked 30.8%. However, exports to Japan declined for the seventh successive month. Of-late, economic indicators of China are showing signs of recovery. Trade data in July came in above expectations while improvement was witnessed in the manufacturing and services sector.
Another economic indicator suggested that the slowdown in Chinese economy is impacting its inflation. According to the National Bureau of Statistics consumer prices increased 2.6% in August compared to the 2.7% rise in July. On an annual basis, producer prices increased 1.6% lower than market estimates of 1.8% and July’s fall of 2.3%.
On the domestic front, according to the data released by the Federal Reserve System, consumer credit for the month of July came in $10.4 billion compared to the consensus estimate of $12.3 billion. On an annual basis, consumer credit increased 4.4% while nonrevolving credit increased 7.4%. Revolving credit declined 2.6%.
Materials stocks gained the most among the top ten S&P 500 industry groups. Stocks such as Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), E I Du Pont De Nemours And Co (NYSE:DD), LyondellBasell Industries NV (NYSE:LYB), Air Products & Chemicals, Inc. (NYSE:APD) and The Dow Chemical Company (NYSE:DOW) gained 2.1%, 0.7%, 0.6%, 2.7% and 0.7%, respectively.
Industrial stocks also had a good run yesterday. The Industrials SPDR (XLI) gained 1.2%. Stocks such as General Electric Company (NYSE:GE), United Technologies Corporation (NYSE:UTX), Union Pacific Corporation (NYSE:UNP), the Boeing Company (NYSE:BA) and United Parcel Service, Inc. (NYSE:UPS) gained 1.0%, 1.2%, 1.1%, 1.1% and 0.4%, respectively.