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Benchmarks finished mostly higher on Friday following some encouraging economic numbers. While a better-than-expected consumer sentiment report and Chicago PMI reading boosted investor confidence, less-than-anticipated growth in US economy and pending home sales were overlooked as an outcome of the severe winter season. The indices not only notched weekly gains, but they also registered strong February gains. 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 0.3% to close Friday’s trading session at 16, 321.71. The Standard & Poor 500 (S&P 500) too added about 0.3% to finish at 1, 859.45. The tech-laden Nasdaq Composite Index, however, declined almost 0.3% to 4, 308.12. The fear-gauge CBOE Volatility Index (VIX) plunged 0.3% to settle at 14. Total volume on the New York Stock Exchange was 3.9 billion shares. Declining stocks were outnumbered by advancing stocks on the NYSE. For 39% stocks that declined, 58% advanced.
For the week, the S&P 500 gained 1.3% and rose 4.3% in February. The Dow rose 1.4% on a weekly basis and posted a gain of 4% in February, its largest monthly percentage gain since January 2013. The NASDAQ increased 1.6% for the week and 5% for the month of February, its biggest monthly gain since September 2013.
Overall, it was an upbeat week for the indices as investors focused more on buoyant earnings reports. They also welcomed positive economic data on durable goods, new home sales and business spending. Much of the weekly gains also came on the back of optimism offered by Federal Reserve Chairwoman Janet Yellen. The Fed Chair blamed the harsh winter climate for recent weakness in the economy.
Coming back to Friday, there were mixed reports on the economic front. Consumers felt more confident about their financial and employment prospects as the February reading for consumer sentiment rose to 81.6 according to the Thomson Reuters/University of Michigan survey of consumers. This rise was more than the consensus estimate of 81.3. Separately, the Chicago Purchasing Managers Index climbed to 59.8 in February, more than the consensus for the current period of 56.7. The report noted this was the first uptrend since October last year.
On the other hand, the fourth quarter GDP growth was lower than expected. According to the “second estimate” by the Bureau of Economic Analysis, the fourth quarter output of goods and services produced by labor and property located in the United States increased at an annual rate of 2.4%, lower than the consensus estimate of 2.6%. The real GDP increase also dropped from the advance estimate for the fourth quarter of 3.2%. In the third quarter, the US economy had expanded 4.1%.
Separately, the National Association of Realtors reported that Pending Home Sales Index, a forward looking indicator based on contract signings, went up 0.1% to 95.0 in January. However, this was far below consensus expectation of a 0.8% increase. Low inventory, declining affordability and harsh winter weather were cited as the prime factors for slow growth.
Markets witnessed temporary selloff post noon following news that Russian troops have increased their presence in Crimea, located in Southern Ukraine. However, the S&P 500 and Dow managed to enter into positive territory before the closing bell; gaining strength from sectors like Financials, Consumer Discretionary and Consumer Staples. However, the NASDAQ settled in the red.
The Financial Select Sector SPDR (XLF) gained 0.5% as stocks such as Wells Fargo & Company (NYSE:WFC), JPMorgan Chase & Co. (NYSE:JPM) and Berkshire Hathaway Inc. (NYSE:BRK-B) went up 0.8%, 0.2% and 1.1%, respectively.
Nine out of ten sectors of the S&P 500 ended in green. The Consumer Staples sector and the Utilities sector led the race as both the sectors rose 0.7%. Stocks from the Consumer Staples Select Sector SPDR (XLP) such as The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO) and Philip Morris International, Inc. (NYSE:PM) moved up 0.6%, 0.3% and 0.2%, respectively.
Stocks from the Utilities Select Sector SPDR (XLU) such as Duke Energy Corporation (NYSE:DUK), NextEra Energy, Inc. (NYSE:NEE) and Southern Company (NYSE:SO) surged 0.6%, 0.9% and 0.8%, respectively.