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Stock Market News for February 12, 2014

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Federal Reserve Chairwoman Janet Yellen’s pledge to keep interest rates low led benchmarks sharply higher on Tuesday. Yellen also said the central bank will continue with tapering of the market-friendly economic stimulus plan. Yesterday’s gains extended benchmarks’ bullish run into the fourth day, the longest one this year.

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The Dow Jones Industrial Average (DJI) soared almost 193 points, or 1.2%, to close yesterday’s trading session at 15,994.77. The Standard & Poor 500 (S&P 500) added a significant 1.1% to move up to 1,819.75. The tech-laden Nasdaq Composite Index inched up 1% to end trading session at 4,191.04. The fear-gauge CBOE Volatility Index (VIX) dropped 4.9% to settle at 14.51. Total volume on the New York Stock Exchange was 3.71 billion; where for 76% advancers, 21% stocks closed in the red.
The day’s action was dominated by what Janet Yellen had to say. Starting her speech at 10 a.m. before the House Financial Services Committee, she said interest rates would continue to be low and supported the tapering process of the economic stimulus plan.
Yellen said: “Let me emphasize that I expect a great deal of continuity in the Federal Open Market Committee’s approach to monetary policy”. A pause in the trimming of the central bank’s bond repurchase program may arise only if economic conditions take a turn for the worse. She said: “I think what would cause the committee to consider a pause is a notable change in the outlook”.
On that note, she said she was surprised by weak jobs data published in recent times but commented: “But we have to be very careful not to jump to conclusions in interpreting what those reports mean.” She added that central bank expects employment and economy to grow at “moderate pace’.
In what was Yellen’s first testimony before lawmakers after taking the Fed chair, she emphasized that interest rates would continue to be low. Also, though she acknowledged the volatile movement in the global financial markets, she said it does “not pose a substantial risk to the U.S. economic outlook”.
Yellen’s speech was closely watched yesterday and investors had in fact refrained from betting big on Monday as they adopted wait and see approach. Benchmarks had closed on Monday almost at the same levels at which they opened the trading session. On Monday, the Dow, S&P 500 and Nasdaq had edged up marginally by 0.1%, 0.2% and 0.5%, respectively.
After investors mostly liked what Yellen said, benchmarks rallied sharply upward. Most economists and experts too provided positive feedback to Yellen’s speech. The gains extended benchmarks’ positive momentum into the fourth day, the longest winning streak this year. Moreover, while the Dow and S&P 500 negated some of the yearly losses, the Nasdaq returned to the green zone for the year. The tech-heavy index is now up 0.4% for the year.
All of the S&P industry groups ended with gains with Healthcare and Energy taking the leads. Health Care Select Sector SPDR (XLV) gained 1.4%. Key stocks such as Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), Merck & Co. Inc. (NYSE:MRK), Gilead Sciences Inc. (NASDAQ:GILD) and Amgen Inc. (NASDAQ:AMGN) gained 2.1%, 1.3%, 1.5%, 1.0% and 0.8%, respectively.
As for the Energy sector, Energy Select Sector SPDR (XLE) rose 1.3%. Stocks including Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Schlumberger Limited (NYSE:SLB) and Occidental Petroleum Corporation (NYSE:OXY) gained 1.5%, 1.7%, 1.5% and 1.0%, respectively.

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