On Wednesday, markets enjoyed their best three-day winning streak in three months as investor sentiment was boosted by news that the Greek austerity plan had been approved by the nation’s lawmakers. This would not only enable Greece avoid a debt default but would also help the global markets avoid bearish sentiments
The Dow Jones Industrial Average (DJIA) moved up 0.6% to settle at 12,261.42. The Standard & Poor 500 (S&P 500) jumped 0.8% to finish the day at 1,307.41. The tech-laden Nasdaq Composite Index settled at 2,740.49, after surging 0.4%. The fear-gauge CBOE Volatility Index (VIX) slid 9.9% to settle at 17.27. On the New York Stock Exchange, Amex and Nasdaq, consolidated volumes were 7.19 billion shares, well below the daily average so far this year of 7.57 billion. The breadth of the market was dominated by the advancers as for every seven stocks that rose on the NYSE, only three were on the declining side. For the week, the benchmarks are all trading in positive territory with the Dow, S&P 500 and the Nasdaq up 2.7%, 3.1% and 3.3%, respectively.
Over the past three days, markets have been able to recoup much of the losses suffered this month, which was largely caused by fears of euro-zone debt crisis. The Dow that fluctuated over and below the psychological level of 12, 000, looks fairly stable for the moment. Many had feared that the S&P 500 would decline to its March low of 1, 250. But, the index has now climbed over 1, 300 and is up 3.96% year-to-date. However, the index is down 4.12% from its April high.
With not much happening on the domestic front, the optimistic mood was primarily attributable to news of the Greek parliament voting in favor of the austerity plan which entails spending cuts, tax hikes and state asset sales. Though violence broke out in Athens, the parliament voted 155 to 138 in favor of the austerity plan. The five-year plan that was finalised by the European Union and the International Monetary Fund last week, was a prerequisite for Greece to receive the next installment of the country's bailout package. Greek Prime Minister George Papandreou faced a formidable task as he attempted to push through the austerity plan which was absolute necessary to prevent a debt default.
On the domestic front, a day after the S&P/Case-Shiller Home Price Indices presented a rosy picture of the housing sector, it was time for the National Association of Realtors (NAR) to lift the mood. The NAR reported a significant rebound in pending home sales for May as it jumped 8.2% to a reading of 88.8 in May from an upwardly revised 82.1 in April. It was also up 13.4% from a reading of 78.3 in May 2010. NAR reported all regions experienced an increase from a year ago, pointing to higher housing activity in the second half of the year. Lawrence Yun, NAR chief economist, said: “Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago, including areas such as Hartford, Conn.; Indianapolis; Minneapolis; Houston; and Seattle.
In intra-day trading, markets wobbled and threatened to lose their gains while the Nasdaq dropped into the red, but strength from the financial, materials and energy lifted the broader markets to ensure a finish in the green. Bank of America Corporation (NYSE:BAC) was one of the leading gainers in the financial sector after it reached a settlement with investors regarding disputes related to mortgage securities. The bank’s stock jumped 3.0% and other winners included, Citigroup, Inc. (NYSE:C), The Goldman Sachs Group, Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), U.S. Bancorp (NYSE:USB) and American Express Company (NYSE:AXP), gaining 3.4%, 2.5%, 2.3%, 4.8%, 1.9% and 2.6%, respectively.
Coming to materials stocks, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), Western Copper Corp. (AMEX:WRN), Newmont Mining Corp. (NYSE:NEM), Augusta Resource Corp. (AMEX:AZC), Sterlite Industries (India) Ltd. (NYSE:SLT) and Taseko Mines Ltd. (AMEX:TGB) gained 2.3%, 3.0%, 1.4%, 9.3%, 2.5% and 5.2%, respectively.
Transocean Ltd. (NYSE:RIG) lifted the energy sector, jumping 3.7%. Other gainers were Nabors Industries Ltd. (NYSE:NBR), Helmerich & Payne Inc. (NYSE:HP), Chevron Corp. (NYSE:CVX), BP plc (NYSE:BP), Hess Corporation (NYSE:HES) and Suncor Energy Inc. (NYSE:SU) and they were up by 1.0%, 2.3%, 0.9%, 1.7%, 2.1% and 1.2%, respectively.