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Stock Market News for August 17, 2012

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Benchmarks posted decent gains on Thursday backed by encouraging earnings from Cisco and a statement by Angela Merkel that all support would be provided to the ECB to help fix Euro-zone debt woes.  Yesterday’s gains boosted S&P 500 closer to its highest levels since April 2 and the gains came after a slew of paltry movements in the benchmarks over the past few days. Also helping the markets was positive housing data.

The Dow Jones Industrial Average (DJI) jumped almost 0.7% to end the day at 13,250.11. The Standard & Poor 500 (S&P 500) added 0.7% to finish yesterday’s trading session at 1,415.51. The tech-laden Nasdaq Composite Index surged roughly 1.1% to close at 3,062.39. The fear-gauge CBOE Volatility Index dropped 2.3% and settled at 14.29. Volumes continued to be low as consolidated volumes on the New York Stock Exchange, Nasdaq and American Stock Exchange were roughly 5.82 billion shares, sharply lower than last year's daily average of 7.84 billion. Advancers outnumbered the declining stocks on the NYSE; as for 69% stocks that gained, 26% stocks closed lower.

Markets had strong catalysts yesterday which accounted for relatively significant movements of the benchmarks. Headlines have been scanty on certain days recently, which coupled with the investors wait-and-watch attitude and the summer holidays kept market movement in check. However, investors did have major headlines to focus on yesterday both on the domestic front as well as from Europe.

On the domestic front, a solid fourth quarter result from Cisco Systems, Inc. (NASDAQ:CSCO) was a major domestic factor for yesterday’s gains. The CEO of this tech bellwether said it was an "unusually strong quarter". However, no one was complaining as this was followed by a 75% hike in quarterly dividend. The company’s shares soared 9.6%, which meant Cisco was the biggest gainer among the 23 of 30 Dow components that jumped yesterday.

Coming to earnings results, bellwether retailer Wal-Mart Stores Inc. (NYSE:WMT) was however a drag on the markets as its sales missed Street estimates. Third quarter guidance provided by the company reflected a drop on a sequential basis. Its shares dropped 3.1% and Wal-Mart was the biggest laggard among the Dow components yesterday. Meanwhile, other retailers like Sears Holdings Corporation (NASDAQ:SHLD), PetSmart, Inc. (NASDAQ:PETM) and Dollar Tree, Inc. (NASDAQ:DLTR) reported their results as well. Shares of Sears Holdings jumped 6.5% after reporting a narrower loss. PetSmart’s shares also moved higher, jumping 4.6% banking upon better-than-expected results. However, Dollar Tree fell short of estimates and its shares dropped 1.8%.

Moving on from earnings, benchmarks were also aided by encouraging housing data. According to the U.S. Census Bureau and the Department of Housing and Urban Development, building permits jumped 6.8% from June to a seasonally adjusted annual rate of 812,000 in July. This also compares favorably with consensus estimates of 764, 000. However, privately-owned housing starts declined in July, dropping 1.1% from June to a seasonally adjusted annual rate of 746,000 in July. Nonetheless, any negative sentiment arising out of this decline was offset by the jump in building permits. Moreover, building permits were at their best since August 2008.

Housing data consequently spurred an uptrend in housing sector stocks and the SPDR S&P Homebuilders (XHB) was up 3.2%. Among housing stocks, Toll Brothers Inc. (NYSE:TOL), Lennar Corp. (NYSE:LEN), KB Home (NYSE:KBH), PulteGroup, Inc. (NYSE:PHM) and D.R. Horton, Inc. (NYSE:DHI) jumped 5.6%, 3.5%, 5.5%, 6.4% and 4.5%, respectively.

Investor sentiment also received a boost from German Chancellor Angela Merkel statement that all efforts would be taken to help the European Central Bank tackle the region’s debt crisis. Merkel said that an earlier statement by the ECB President Mario Draghi to do “whatever it takes” to preserve the Euro-zone was in tune with e what European leaders have been working on. “We feel committed to do everything we can in order to maintain the common currency,” Merkel added.

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