Investors grew hopeful once again about fresh economic stimulus
after Chicago Federal Reserve Bank President Charles Evans spoke in
support of such a move, helping markets to end significantly
higher. Yesterday's strong rally washed out all of Monday's losses
with financial and material stocks gaining the most. Investors also
focused on domestic developments and ignored Fitch Ratings
downgrade of 18 Spanish banks.
The Dow Jones Industrial Average (DJI) jumped a robust 1.3% or
162.57 points to close at 12,573.80. The Standard & Poor 500
(S&P 500) gained 1.2% and finished yesterday's trading session
at 1,324.18. The tech-laden Nasdaq Composite Index surged 1.2%,
ending 33.34 points higher at 2,843.07. The fear-gauge CBOE
Volatility Index (VIX) declined 6.2% and settled at 22.09. Total
volumes on the New York Stock Exchange were 3.45 volume shares, and
the advancers far outnumbered the declining stocks. On the NYSE,
for 76% stocks that jumped, 21% stocks closed lower.
The robust gains washed out all of the losses the markets
endured on Monday, a day which was once again dominated by European
financial worries. On Monday, investors were apprehensive about how
far the bailout would go to solve the lingering financial woes of
the region. Market experts opined that fundamental concerns were
still not being addressed. Thus, widespread concerns dented the
benchmarks on Monday. However, while these worries spilled over on
to Tuesday, they were restricted only to the European frontier and
markets there had a gloomy day.
Also, the European markets had to come to terms with Fitch
Ratings downgrading 18 Spanish banks. Bankia, one of the largest
lenders of the nation, was also one among the 18 banks to be
downgraded and its long-term issuer default rating dropped from
BBB+ to BBB. The downgrade, according to Fitch, was due to
"concerns about the potential for the loan portfolios of certain
banks to deteriorate further". Rising fears in the nation also
pushed up Spain's borrowing cost to a record high. The 10-year
Spanish bond yield touched a high of 6.83% before moving down
marginally. The bond-yields were at its highest level since Spain
entered the euro.
However, investors on the home front had reasons for cheer and
they completely shrugged off cross-Atlantic concerns. Chicago
Federal Reserve Bank President Charles Evans told a media house
that he supports actions to accelerate jobs growth. Evans once
again spurred hopes of the central bank proving fresh economic
stimulus after he said: "More asset purchases would be useful. More
mortgage-backed securities purchases would be good". The Federal
Open Market Committee policy makers are set to meet next week and
Evans' comments ahead of that was what investors chose to focus on.
He made the case for such action stronger by saying: "It's
currently going to take longer than anybody would like. If we had
more aggressive monetary policy, it would happen sooner". He is one
among the few so far to be vocal about renewed stimulus, hopes of
which have consistently been dashed by the central bank so far.
With hopes rising once again about fresh economic measures,
benchmarks rallied strongly and the financial and materials sectors
emerged as strong winners. The Financial Select Sector SPDR (XLF)
jumped 1.6% and the Materials Select Sector SPDR (XLB) gained 1.9%.
Looking first at the financial stocks, American Express Company
), Bank of America Corp (NYSE:
), Citigroup Inc. (NYSE:
), JPMorgan Chase & Co. (NYSE:
), Morgan Stanley (NYSE:
) and U.S. Bancorp (NYSE:
) gained 2.5%, 2.9%, 4.3%, 2.9%, 4.2% and 2.5%, respectively.
As for the material stocks, E I Du Pont De Nemours And Co (NYSE:
), PPG Industries, Inc. (NYSE:
), Freeport-McMoRan Copper & Gold Inc. (NYSE:
), Southern Copper Corp (NYSE:
) and HudBay Minerals Inc (NYSE:
) jumped 2.5%, 2.2%, 1.9%, 1.0% and 3.4%, respectively.
AMER EXPRESS CO (AXP): Free Stock Analysis
BANK OF AMER CP (BAC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis
FREEPT MC COP-B (FCX): Free Stock Analysis
HUDBAY MINERALS (HBM): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis Report
PPG INDS INC (PPG): Free Stock Analysis Report
SOUTHERN COPPER (SCCO): Free Stock Analysis
US BANCORP (USB): Free Stock Analysis Report
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