Benchmarks closed in positive territory on Friday following gains in financial services and healthcare stocks. Despite decline in prices on Friday, the recent rally in crude reduced chances of energy companies’ loan defaults, which helped the financial sector eke out gains. Meanwhile, the Dow registered gains for the sixth straight session, its longest series of gains in five months. The S&P 500 and the Dow closed in the green for the year for the first time in 2016. All the key U.S. indexes posted fifth consecutive weekly gains for the first time since November.
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The Dow Jones Industrial Average (DJI) increased 0.7%, or 120.81 points, to close at 17,602.30. The S&P 500 rose more than 0.4% to close at 2,049.58. The tech-laden Nasdaq Composite Index closed at 4,795.65, also gaining 0.4%. The fear-gauge CBOE Volatility Index (VIX) decreased 2.9% to settle at 14.02, its lowest one-day settlement since Aug 18. A total of around 10.9 billion shares were traded on Friday, significantly higher than the last 20-session average of 8.02 billion shares. Advancers outpaced declining stocks on the NYSE. For 59% stocks that advanced, only 38% declined.
Financial stocks increased on Friday as strong rally in oil prices in recent times reduced worries over the possibility of loan defaults by energy companies. The broader financial sector was also boosted after shares of both Bank of America Corporation ( (BAC - Free Report) and JPMorgan Chase & Co. (JPM - Free Report) rose 2.9% following the announcement of their buyback programs. While JP Morgan raised its shares repurchases by 29% or $1.88 billion, Bank of America decided to expand its buyback program by 20% or $800 million. Increase in shares of JP Morgan and a 3.1% gain in Goldman Sachs Group, Inc.’s ( (GS - Free Report) shares helped the Dow move upward.
Meanwhile, the Financial Services Select Sector SPDR (XLFS) advanced more than 0.8%, emerging as the highest advancer in the S&P 500 sectors. Top holdings from the sector such as Wells Fargo & Company (WFC - Free Report) , American Express Company (AXP - Free Report) , Morgan Stanley (MS) and Citigroup Inc. (C - Free Report) rose 1.6%, 1.9%, 1.7% and 1.6%, respectively.
Additionally, the Health Care Select Sector SPDR (XLV) rose 0.8%, becoming the second highest advancer among the S&P 500 sectors. Also, the iShares Nasdaq Biotechnology ETF (IBB) increased 1.8%. Key stocks from the sector including Celgene Corporation (CELG - Free Report) , Amgen Inc. (AMGN - Free Report) , Biogen Inc. (BIIB - Free Report) , Mylan N.V. (MYL - Free Report) and Illumina Inc. (ILMN - Free Report) increased 2.1%, 1%, 1.8%, 1.9% and 2.1%, respectively.
Gains in shares of Adobe Systems Inc. (ADBE - Free Report) following better-than-expected earnings results helped the tech-based index close in the green despite losses in shares of Microsoft Corporation (MSFT) and Amazon.com, Inc. ( AMZN).
Shares of Adobe rose 3.9% after reporting fiscal first-quarter earnings of 52 cents per share, beating the Zacks Consensus Estimate of 47 cents. Adobe’s revenues of $1.38 billion were also more than the Zacks Consensus Estimate of $1.325 billion. For fiscal second quarter, management expects revenues in the range of $1.365–$1.415 billion. Analysts polled by Zacks expect revenues to be $1.384 billion, lower than the guided range at the mid-point. However, shares of Microsoft and Amazon declined 2.1% and 1.3%, respectively.
However, oil prices decreased on Friday following rise in rig counts, but managed to make fifth consecutive weekly gain. According to Baker Hughes ( BHI), the total number of U.S. oil rigs increased by 1 to 387 for the week ending March 18, rising for the first time this year. Both the WTI and Brent crude fell 1.9% and 0.8% to $39.44 per barrel and $41.20 a barrel, respectively.
In economic news, final reading of consumer sentiment index released by University of Michigan came in at 90 in March, lower than the consensus estimate of 92.2. It was also lower than the February’s reading of 91.7.
Separately, St. Louis Fed President James Bullard said on Friday that both employment and inflations goals have been reached and "prudent policy suggests edging the policy rate and the balance sheet towards more normal levels."
The New York Fed President William Dudley said that Fed supervisors “can reduce the chances” of bank failures “but can never guarantee” to eliminate those risks. Boston Federal Reserve Bank President Eric Rosengren said “a more proactive supervisory push to make U.S. (large banks) more resilient has been appropriate and beneficial- as evidenced by market reaction to recent global volatility."
For the week, the Dow, S&P 500 and Nasdaq advanced 2.2%, 1.3% and 1%, respectively. Benchmarks ended upward for the week on the back of oil price rally and positive impact of the Federal Open Market Committee’s (FOMC) policy statement. Energy, industrials and materials sectorswere the leading sectors during the week.
During the week the Energy Information Administration (EIA) reported a lower-than-expected rise in crude inventories, which alongwith Qatari oil minister Mohammed Bin Saleh Al-Sada’s positive comments boosted crude prices. WTI and Brent crude rose 6.9% and 2.3% respectively for the week.
After concluding two-day policy meeting on Wednesday, the Federal Open Market Committee (FOMC) decided to keep interest unchanged and forecasted that number of rate hikes this year will be two instead of four. Despite reducing outlook for GDP growth and inflation rate, FOMC said: “economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months.”
In economic news, Empire State Manufacturing Survey Index, Core CPI, housing starts and Philadelphia Fed’s business conditions index came in encouraging during the week. Though seasonally adjusted initial claims increased for the week ending March 12 but were less than the consensus estimate.
However discouraging economic data including the U.S. retail sales, Producer Price Index (PPI), Consumer Price Index (CPI), building permits, industrial production and capacity utilization dampened investor sentiment. Meanwhile, Valeant Pharmaceuticals International, Inc’s ( VRX) shares slumped on Wednesday following lower-than-expected earnings results and poor guidance, which also had a negative impact on the healthcare sector.