Benchmarks bolstered gains during yesterday’s trading session as the Federal Reserve decided to continue with the massive $85 billion bond purchase program. Better than expected earnings from Fedex also added a boost to investor sentiment. Meanwhile, housing start and building permits data came in below expectations. All the top ten S&P 500 industry groups finished in the green during yesterday’s trading session. Utilities stocks were the biggest gainers.
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The Dow Jones Industrial Average (DJI) gained 1.0% to close the day at 15,676.94. The S&P 500 increased 1.2% to finish yesterday’s trading session at 1,725.52. The tech-laden Nasdaq Composite Index rose 1.0% to end at 3,745.7. The fear-gauge CBOE Volatility Index (VIX) decreased 6.5% to settle at 13.59. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 7.39 billion shares, well above 2013’s average of 6.24 billion shares. Advancing stocks outnumbered the decliners. For 15% shares that declined, 84% advanced.
Benchmarks rallied nearly 1% yesterday after the Federal Reserve decided to continue with the monthly bond purchase program. The Fed chairman, Ben Bernanke said the Central bank is looking for underlying signs of improvement in the economy. Once the confirmation is received, then only will the tapering of the bond purchase program be implemented. While benchmarks moved upwards following the decision to continue the bond purchase program, central banks remain cautious over the recent rally. Central bank has conveyed concerns in light of upcoming “budget and debt limits”.
Meanwhile, the Fed lowered growth expectations for the economy. Economic growth is expected within the range of 2% and 2.3% from June’s expectations of 2.3% and 2.6%. Growth expectations have declined more steeply to a range of 2.9% and 3.1% from the previously expected range of 3.0% and 3.5%.
According to the US Department of Commerce, housing starts for the month of August came in at 891,000, well below the consensus estimate of 919,000. However, on a month over month, this was above June’s figure of 883,000. On a year over year basis, the figure grew 19%. On a single family basis, housing starts came in at 628,000, up 7% compared to July’s figure of 587,000. Building permits for the month of August came in at 918,000 compared to previous month’s figure of 954,000. High mortgage rates have lowered t home sales and permissions. However, the housing sector is expected to remain strong.
On the earnings front, shares of FedEx Corporation (NYSE:FDX) gained nearly 5.0% on the back of better than expected profits. Earnings of the company came in at $1.53 a share compared to the Street’s expectation of $1.50 a share and $1.45 a share in the previous quarter. Revenues of the company increased 11% to $11 billion. This was marginally above the Street’s estimates. On a yearly basis, Fedex expects earnings growth between the range of 7% and 13%.
Utilities stocks gained for the second consecutive day during yesterday’s trading session. The Utilities SPDR (XLU) gained 3.0%. Stocks such as Duke Energy Corp (NYSE:DUK), The Southern Company (NYSE:SO), Dominion Resources, Inc. (NYSE:D), Sempra Energy (NYSE:SRE) and PG&E Corporation (NYSE:PCG) gained 3.0%, 3.6%, 3.1%, 2.6% and 2.7% respectively.
Energy stocks also had a very good run yesterday. The Energy Select Sector (XLE) gained 1.2%. Stocks such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Hess Corp. (NYSE:HES), ConocoPhillips (NYSE:COP) and Honeywell International Inc. (NYSE:HON) gained 0.7%, 1.2%, 1.8%, 1.2% and 0.4%, respectively.