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.
CISCO SYSTEMS (CSCO): Free Stock Analysis
Report
D R HORTON INC (DHI): Free Stock Analysis
Report
DOLLAR TREE INC (DLTR): Free Stock Analysis
Report
KB HOME (KBH): Free Stock Analysis Report
LENNAR CORP -A (LEN): Free Stock Analysis
Report
PETSMART INC (PETM): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis
Report
SEARS HLDG CP (SHLD): Free Stock Analysis
Report
TOLL BROTHERS (TOL): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research