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Stock Market News for February 21, 2014

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Benchmarks moved up on Thursday as investors received a boost after a reading on manufacturing activity hit a four year high. Also, Facebook’s deal to buy WhatsApp and Tesla Motors’ strong results somewhat added to the positive sentiment. The gains on Thursday came despite weak data from China, Japan and Euro zone amidst a report of contraction in Philadelphia Fed's gauge of manufacturing activity.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) gained 0.6% to close Thursday’s trading session at 16133.23. The Standard & Poor 500 (S&P 500) too moved up 0.6% to finish at 1839.78. The tech-laden Nasdaq Composite Index rose 0.7% to move up to 4267.55.  The fear-gauge CBOE Volatility Index (VIX) dropped 4.6% to settle at 14.79. Total volume on the New York Stock Exchange was 3.4 billion shares. Advancers outpaced the decliners on the NYSE. For 63% stocks that gained, 33% stocks closed lower on the NYSE.
Dismal data from China, Japan and Euro zone weighed on the benchmarks for a while in the morning. China’s HSBC Manufacturing PMI dropped from 49.5 to 48.3; Japan reported a larger-than-expected trade deficit and the Euro zone Manufacturing PMI dropped to 52.7 in February from 52.9 in January.
However,  the  markets  overcame  these  bottlenecks  as  they  gained  strength  on release  of  better-than-expected reading of Markit's preliminary US Manufacturing Purchasing Managers Index.  The preliminary reading showed Markit US flash purchasing managers index climbing to 56.7 in February from 53.7 in January. This was the highest level in almost four years.
However, the Philadelphia Federal Reserve’s manufacturing index plummeted to negative 6.3 in February from 9.4 in January. It also stated that demand for manufactured goods as measured by current new orders index decreased and current shipments also plunged. Incidentally this was the first negative reading of the index in nine months.
Separately, the U.S. Department of Labor reported that seasonally adjusted initial claims dropped 3000 to 336,000 in the week ending February 15. The drop was smaller than consensus expectations of initial claims declining to 330,000.
The US Bureau of Labor Statistics came out with consumer price data; wherein it reported Consumer Price Index for All Urban Consumers (CPI-U) had improved marginally, by 0.1%, in January. The increase was in line with the consensus estimate.
News on the merger and acquisition front also helped the bullish rally. Social networking giant Facebook Inc. (NASDAQ:FB) entered into a landmark deal when it expressed its interest to buy mobile-messaging company WhatsApp for a whopping $19 billion in cash and stock. Facebook’s shares improved 2.3% to close at 69.63.
The Technology Select Sector SPDR (XLK) gained 0.3%. Key technology stocks such as Microsoft Corp. (NASDAQ:MSFT), AT&T Inc. (NYSE:T), Oracle Corp. (NYSE:ORCL) and International Business Machines Corporation (NYSE:IBM) gained 0.6%, 1%, 1.1% and 0.7%, respectively.
Earnings news was also reassuring to investors. Tesla Motors Inc.’s (NASDAQ:TSLA) stock jumped 8.4% to $209.97 after hitting an intraday record of $215.21. The electric car maker reported better-than-expected fourth quarter profit after the closing bell on Wednesday. The company is optimistic about its luxury car segment and believes that sales will improve by 55% this year.
Coming back to the sectors, all the ten sectors of the S&P 500 settled in the green with materials increasing the most. The Materials Select Sector SPDR (XLB) led the race as it gained 1.1%. Stocks from the sector such as E. I. du Pont de Nemours and Company (NYSE:DD), Monsanto Co. (NYSE:MON), Dow Chemical Company (NYSE:DOW) and LyondellBasell Industries N. V. (NYSE:LYB) surged 1.7%, 1.4%, 1.5% and 1.8%, respectively.

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