Report that central banks were prepared to step in if Greek
elections cause 'tumultuous trading' guided the benchmarks to a
finish in the green. The report came amidst lingering tension over
Europe's financial health, a rise in domestic initial claims and
consumer prices suffering their biggest decline in over three
years. This discouraging data in combination with the worsening
condition of global economic health made the case stronger for
central banks to step up monetary measures.
The Dow Jones Industrial Average (DJI) soared 1.2% or 155.53
points to close trading at 12,651.91. The Standard & Poor 500
(S&P 500) also gained 1.2% and finished yesterday's trading
session at 1,329.10. The tech-laden Nasdaq Composite Index surged
0.6% and was up to 2,836.33. The fear-gauge CBOE Volatility Index
(VIX) slumped a sharp 10.7% to settle at 21.68. Consolidated
volumes on the New York Stock Exchange, Nasdaq and American Stock
Exchange were roughly 6.6 billion shares, lower than the 20-day
moving average. Advancing stocks dominated decliners on the NYSE;
as for 69% that gained, only 29% stocks ended lower.
Markets had opened in the green and mostly stayed afloat in
positive territory. But following a Reuter's report which said
central banks were ready to bolster economic measures following
Greece's elections, the benchmarks enjoyed a steep increase. The
Dow jumped by as much as 202 points at one point, before moving
down marginally. Such was also the case for fellow benchmarks,
which touched their day's highs following the news. Nasdaq
benefited the most from this report, as it had moved into negative
territory briefly, and the report boosted it sufficiently for a
green finish.
Coming to the details of the report, Reuters noted: "Central
banks from major economies stand ready to take steps to stabilize
financial markets by providing liquidity and preventing a credit
squeeze if the outcome of Greek elections on Sunday causes
tumultuous trading, G20 officials told Reuters". Reuters quoted a
G20 aide as saying that: "The central banks are preparing for
coordinated action to provide liquidity". Thus, with increasing
hopes of economic measures coming into force, benchmarks moved
upwards.
The report also came at a time when domestic investors' hopes
for further monetary easing were raised recently. Earlier this
week, Chicago Federal Reserve Bank President Charles Evans said he
supports actions to accelerate jobs growth. Last week, the Atlanta
and San Francisco Fed presidents had fuelled hopes of another round
of economic stimulus, but Fed Chairman Ben Bernanke dashed all
those hopes a few days later. For now, investors all eyes will be
on the Federal Open Market Committee next week
With European concerns already weighing on investors, U.S.
economic readings provided no respite either. Initial claims jumped
and consumer prices declined. However, a few onlookers noted that
the dismal scenario made the case for central banks to introduce
further measures stronger to combat sluggish economic
conditions.
According to the U.S. Department of Labor, initial claims
increased 6, 000 from the prior week's revised figure of 380,000,
to move up to 386,000 in the week ending June 9. The figure was
significantly higher than consensus estimates of 372, 000. But for
the previous week, initial claims have been trending up steadily
since late April. Thus, labor market conditions seem difficult and
this key indicator of the economy clearly reflects its sluggish
state.
Additionally, the U.S. Bureau of Labor Statistics noted that the
Consumer Price Index for All Urban Consumers (CPI-U) moved down
0.3% in May. The CPI dropped by the most since December 2008. The
report also said: "The gasoline index declined 6.8 percent in May,
leading to a sharp decrease in the energy index and the decline in
the all items index. The indexes for natural gas and fuel oil
declined as well, though the electricity index increased… The index
for all items less food and energy rose 0.2 percent in May, the
third consecutive such increase".
Coming to sectoral stocks, the energy sector was a major gainer
and the Energy Select Sector SPDR (XLE) jumped 1.6%. Among energy
shares, Chevron Corporation (NYSE:
CVX
), Exxon Mobil Corporation (NYSE:
XOM
), ConocoPhillips (NYSE:
COP
), Western Refining, Inc. (NYSE:
WNR
) and Halliburton Company (NYSE:
HAL
) jumped 1.8%, 1.9%, 1.1%, 2.3% and 1.6%, respectively.
CONOCOPHILLIPS (COP): Free Stock Analysis
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CHEVRON CORP (CVX): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis
Report
WESTERN REFING (WNR): Free Stock Analysis
Report
EXXON MOBIL CRP (XOM): Free Stock Analysis
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