Encouraging reports on housing combined with better-than-expected earnings from a couple of companies helped benchmarks finish in the green. Meanwhile, weak Consumer Price Index (CPI) and Industrial Production data added weight to the Federal Reserve’s argument of continuing monetary stimulus to accelerate economic growth. All the top ten S&P 500 industry groups registered gains, among which consumer staples stocks gained the most.
The Dow Jones Industrial Average (DJI) increased 1.1% to close the day at 14,756.78. The S&P 500 gained 1.4% to finish yesterday’s trading session at 1,574.57. The tech-laden Nasdaq Composite Index rose 1.5% to end at 3,264.63. The fear-gauge CBOE Volatility Index (VIX) lost 19.2% to settle at 13.96. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.4 billion shares, below 2012’s average of 6.48 billion shares. Advancing stocks outnumbered the decliners. For the 78% that advanced, 20% declined.
Investor sentiment received a boost following encouraging housing sector data. According to the U.S. Department of Housing and Urban Development, privately-owned housing starts in March crossed the 1 million-mark to touch 1,036,000. This was well above the consensus estimate of 930,000 and 7% above previous month’s figure of 968,000. Housing starts also surpassed the 1 million-mark for the first time since 2008. Building permits came in at 902,000, 3.9% below previous month’s figure of 939,000, while housing completions reached 800,000, 11% above previous month’s figure of 721,000.
Meanwhile, industrial production increased to 0.4% in March. This was above the consensus estimate of 0.2% but well below previous month’s figure of 1.1%. Manufacturing, production at mines and output of utilities form a major part of industrial production. Production at mines inched down 0.2% in March, while, output in utilities surged 5.3%. Manufacturing output decreased 0.1% after rising 0.9% in February. Among the major market groups the construction sector contracted month over month, while consumer goods, business equipment and materials output increased.
According to the U.S. Department of Labor, the Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.2% in March. The CPI was expected to remain unchanged. The decrease in the CPI-U Index is primarily due to a declination in electricity and fuel index while the food index remained unchanged.
Investor sentiment remained buoyant in spite of weak economic numbers. The Federal Reserve had introduced monetary stimulus measures to revive economic growth. Stimulus was to continue until unemployment level came down to 6.5% and the inflation rate at 2.5%. In past few weeks, there was a debate on whether or not the stimulus package should be continued. However, weak economic numbers, such as low payroll numbers released a couple of weeks ago and low CPI rate, confirms that monetary stimulus will stay on track to accelerate economic growth.
On the earnings front, shares of the Coca-Cola Company (NYSE:KO) increased 5.7% after its first-quarter earnings beat the Street’s expectation. Revenue decreased year over year, but topped estimates. The soft drink giant reported strong sales in emerging nations such as Brazil, Russia, India, Mexico and Thailand. Shares of Goldman Sachs Group, Inc. (NYSE:GS) decreased 1.6% even after earnings surpassed analysts’ expectations. Revenues of the company increased due to good performance from its investment banking division. However, investor sentiment was dampened when the company reported a decrease in revenue from client trading.
Of the top ten S&P 500 industry groups, consumer staples stocks gained the most. Stocks such as the Procter & Gamble Company (NYSE:PG), Philip Morris International Inc. (NYSE:PM), Wal-Mart Stores, Inc. (NYSE:WMT) and CVS Caremark Corporation (NYSE:CVS) increased 0.6%, 0.9%, 0.3% and 2.3%, respectively.