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Stock Market News for August 22, 2014

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Positive economic reports propelled benchmarks to record highs on Thursday. Economic data on manufacturing, existing home sales, initial claims and leading economic indicators all came in positive. The four-day rally in S&P 500 boosted it to a record close. While Nasdaq closed at its highest level since Mar 31, 2000, Dow closed at the best level since Jul 24. Investors also waited for what Janet Yellen and Mario Draghi have to say at Jackson Hole, Wyo on Friday.

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The Dow Jones Industrial Average (DJI) gained almost 0.4% to close at 17,039.49. The Standard & Poor 500 (S&P 500) advanced 0.3% to settle at 1,992.37. The tech-laden Nasdaq Composite Index closed at 4,532.10; gaining 0.1%. The fear-gauge CBOE Volatility Index (VIX) dropped 0.2% to settle at 11.76. A total of 4.5 billion shares were traded on Thursday, less than last five day’s average of 5.1 billion. Advancers outpaced declining stocks on the NYSE. For 49% stocks that advanced, 47% declined.
The Philadelphia Federal Reserve’s manufacturing index surged to 28 in August from 23.9 in July. It touched the highest level in August since Mar 2011. However, demand for manufactured goods as measured by current new orders index slowed down in August. Current shipments also decreased. Separately, the Conference Board’s leading economic index increased 0.9% in July after it rose 0.6% in June. This was also more than the consensus estimate of a rise by 0.6%.
The National Association of Realtors reported existing home sales rose 2.4% to a seasonally adjusted annual rate of 5.15 million in July from June’s revised figure of 5.03 million. This was also more than the consensus estimate of 5.02 million. Existing home sales rose for the fourth consecutive month in July, touching the highest level since Sep 2013.
Separately, the U.S. Department of Labor reported that claims for unemployment benefits declined in the week ending Aug 16 to 298,000 from the previous week’s revised level of 312,000. This was lower than consensus estimate of 304,000.
Separately, shares of Bank of America Corporation (BAC - Free Report) increased 4.1% after the company agreed to pay $16.65 billion in cash to the U.S. government. This is the largest settlement between the government and a single company. Bank of America had to pay this sum after the government alleged that BofA sold flawed mortgage-backed securities in the build up to the financial crisis.
The Financial Select Sector SPDR ETF (XLF) gained 1.2%, the highest among the S&P 500 sectors. Key stocks from the sector such as Wells Fargo & Company (WFC - Free Report) , JPMorgan Chase & Co. (JPM - Free Report) , Citigroup Inc. (C - Free Report) , American Express Company (AXP - Free Report) and U.S. Bancorp (USB - Free Report) increased 0.9%, 1.5%, 2.6%, 0.7% and 1.2%, respectively.
Hewlett-Packard Company (HPQ - Free Report) and Hormel Foods Corporation (HRL - Free Report) were among the biggest gainers in the S&P 500 after both the companies reported strong quarterly results. Shares of Hewlett-Packard and Hormel Foods soared 5.4% and 4.3%, respectively. Sharers of eBay Inc. (EBAY - Free Report) rallied 4.7% on reports that the company was contemplating spining off PayPal as early as next year.
Meanwhile, investors remained focused on the annual symposium of central bankers scheduled to be held in Jackson Hole, Wyo on Friday. The U.S. Federal Reserve Chairwoman Janet Yellen’s speech will possibly indicate whether the quantitative easing program will continue. European Central Bank President Mario Draghi’s speech will provide clues as to whether ECB will push for easy monetary policy in order to combat the perils of deflation.
Six out of 10 sectors of the S&P 500 ended in the green. The Technology Select Sector SPDR (XLK) advanced 0.5%, the second highest among the S&P 500 sectors. Key stocks from the sector such as Microsoft Corporation (MSFT - Free Report) , Oracle Corporation (ORCL - Free Report) , AT&T, Inc. (T - Free Report) and International Business Machines Corporation (IBM) gained 0.6%, 0.8%, 0.3% and 0.6%, respectively.

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