Markets enjoyed back-to-back gains as hopes of coordinated
action by central banks boosted investor sentiment all through the
day on Friday. G20 sources said central banks might be ready to
step in to provide liquidity after gauging the consequences of the
Greek elections. Additionally, the Bank of England also talked
about providing liquidity to the economy. These catalysts took the
upper hand over any apprehensions ahead of the crucial Greek vote,
and eventually benchmarks also enjoyed two consecutive weeks of
The Dow Jones Industrial Average (DJI) soared 115.26 points or
0.9% to finish at 12,767.17. The Standard & Poor 500 (S&P
500) inched up a percent to close 13.74 points higher at 1,342.84.
The tech-laden Nasdaq Composite Index jumped 1.3% and ended
yesterday's trading session at 2,872.80. The fear-gauge CBOE
Volatility Index (VIX) dropped 2.6% and settled at 21.11. The
Street had a busy day with consolidated volumes on the New York
Stock Exchange, American Stock Exchange and Nasdaq at roughly 7.5
billion shares, well above this year's daily average of 6.84
billion. Advancers outpaced the decliners, as for every stock that
declined on the NYSE, more than a couple of stocks moved up.
The Dow not only registered back-to-back finishes, the blue-chip
index also registered triple-digit gains on both these days.
However, only five of the 30 Dow components had to close in the red
with The Home Depot, Inc. (NYSE:
) being the biggest loser registering only a 0.6% decline. As for
the remaining 25 components or the gainers, American Express
), Bank of America Corporation (NYSE:
), Chevron Corporation (NYSE:
), International Business Machines Corporation (NYSE:
), Microsoft Corporation (NASDAQ:
) led the advancers as they jumped 2.2%, 3.1%, 2.4%, 2.1% and 2.3%,
Back-to-back gains were not only restricted to Friday's session,
but the indices also registered consecutive weekly gains. The week
ending June 8th had seen the benchmarks recording their best weekly
gains this year. Those gains were perfectly backed up by another
weekly gain this time. The Dow, S&P 500 and the Nasdaq jumped
1.7%, 1.3% and 0.5%, respectively, for the week.
The benchmarks did had a volatile run through the week. However,
gains on the final two days of the week ensured a winning finish.
The fear-gauge index also reflected the volatility, as it swung
between a red and green finish through last week, except for the
final two days. The VIX gained on Monday, dropped on Tuesday and
again moved up on Wednesday, before moving down on the last two
days. The 5-day change for the VIX stands at a mere negative
Gains on the last two days, were largely result of hopes for
fresh economic stimulus that lifted the benchmarks. According to a
report on Thursday, G20 officials said central banks across the
globe were ready to provide liquidity following the results of the
Greek elections. Reuters quoted a G20 aide as saying that: "The
central banks are preparing for coordinated action to provide
liquidity". The report came in late on Thursday and instantly
caused a steep rise in benchmarks. The momentum carried over into
Friday, as investors grew increasingly hopeful about fresh monetary
stimulus which would help stabilize the flagging economy.
The report came at a time when certain U.S. Fed presidents have
been providing optimism to investors, speaking about the
possibility of fresh monetary stimulus. Chicago Federal Reserve
Bank President Charles Evans and the Atlanta and San Francisco Fed
presidents have been speaking about injecting more liquidity into
the system. However, Fed Chairman Ben Bernanke did not say anything
definite on monetary policy during his last congressional
Nonetheless, news from across the Atlantic helped boost the
benchmarks after European Central Bank (ECB) President Mario Draghi
said the bank is ready to support the region's banking system.
Draghi said: "The eurosystem will continue to supply liquidity to
solvent banks where needed". The Group of 20 (G20) is to meet very
soon, and Draghi's comments came just ahead of this. Separately, UK
Chancellor George Osborne along with Bank of England Governor Sir
Mervyn King announced a near £100 billion financial plan to boost
the economy. Osborne acknowledged the need to "deploy new
firepower" and that the Bank of England was to start providing
loans at a cheaper rate.
On the domestic front, these positives helped the financial
sector end decently higher. The Financial Select Sector SPDR (XLF)
jumped 1.5% and stocks including Citigroup Inc. (NYSE:
), Goldman Sachs Group, Inc. (NYSE:
), Morgan Stanley (NYSE:
) and UBS AG (USA) (NYSE:
) gained 1.4%, 2.0%, 2.7% and 2.2%, respectively.
However, domestic economic readings were far from encouraging.
The Empire State Manufacturing Survey by the Federal Reserve Bank
of New York noted a downtrend. The report stated: "The general
business conditions index fell fifteen points, but remained
positive at 2.3. The new orders index declined six points to 2.2,
and the shipments index fell a steep nineteen points to 4.8".
However, the report noted: "The June Empire State Manufacturing
Survey indicates that manufacturing activity expanded slightly over
the month". Separately, a report by the Board of Governors of the
Federal Reserve System reported that industrial production dropped
0.1% in May. Further, the Thomson Reuters/University of Michigan
consumer sentiment index dropped significantly to 74.1 in early
June from 79.3 in May 77.8 in early May.
AMER EXPRESS CO (AXP): Free Stock Analysis
BANK OF AMER CP (BAC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
CHEVRON CORP (CVX): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
HOME DEPOT (HD): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis
UBS AG (UBS): Free Stock Analysis Report
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