Benchmarks bolstered gains for the third consecutive day after
several Fed presidents "downplayed" the Federal Reserve's
decision of tapering bond purchasing program by the end of 2013.
A couple of better-than-expected domestic reports also added to
investor optimism. The Dow Jones posted three figure gains for
the third consecutive day. Of the top ten S&P 500 industry
groups, financial stocks gained the most. Materials stocks were
the only loser.
For a look at the issues facing today's markets, read our
Ahead of Wall Street for June 28
The Dow Jones Industrial Average (DJI) gained 0.8% to close
the day at 15,024.46. The S&P 500 increased 0.6% to finish
yesterday's trading session at 1,613.20. The tech-laden Nasdaq
Composite Index rose 0.8% to end at 3,401.86. The fear-gauge CBOE
Volatility Index (VIX) lost 2.0% to settle at 16.86. Consolidated
volumes on the New York Stock Exchange, American Stock Exchange
and Nasdaq were roughly 6.3 billion shares, marginally below
2013's average of 6.36 billion shares. Advancing stocks
outnumbered the decliners. For 81% that advanced, 17%
Volatility has dominated the markets following Ben Bernanke's
testimony which said tapering could be implemented over the Fed's
"next few meetings". Last week, the Central Bank said it could
slowdown its $85 billion bond purchase program and completely end
it by mid-2014. Apart from these developments, a possible credit
crunch in China also added fears in markets. However, these fears
were overshadowed by encouraging domestic reports and low GDP
numbers released recently. The report GDP reassured investors
that tapering could go off the table, boosted market sentiment.
Although the S&P 500 has rallied about 2.6% over the last
three sessions, it is still nearly 3% below its all-time
Yesterday's market was largely dominated by Fed officials'
comments. Three Fed officials hinted towards the fact that the
Fed's $85 billion bond purchase program could go on if the job
market does not improve as expected. Federal Reserve Board
Governor Jerome Powell said: "If the performance of the economy
is weaker, the Committee may delay before moderating purchases or
even increase them."
Adding to the same tone, William Dudley, president of the
Federal Reserve Bank of New York added that if economic figures
contradict Fed's estimates, bond purchases increase. Dudley said:
"If labor market conditions and the economy's growth momentum
were to be less favorable, I would expect that the asset
purchases would continue at a higher pace for longer." Dennis
Lockhart, president of Atlanta Federal Bank said the pace of bond
purchase program depends on the trajectory of future economic
According to the National Association of Realtors, Pending
Home Sales Index surged 6.7%, well above consensus estimates of
1%. The index came in at 112.3 in May above last month's index of
105.2. On a year over year basis, the index increased 12.1%. The
contract activity has also grown at its fastest pace since
December 2006. Existing home sales are expected to increase
within a range of 8.5% and 9.0% to about 5.07 million marginally
higher than 5.03 million, recorded in 2007. The existing home
sales data is at its peak level in last 7 years.
On the other hand, encouraging domestic reports also boosted
investor sentiment. According to the U.S. Department of Commerce,
personal income for May increased 0.5% compared to the consensus
estimate of 0.3%. This increase is also higher that April's
growth of 0.1%. Personal consumption expenditure increased 0.3%
in line with consensus estimates, unchanged from last month's
Meanwhile, the U.S. Department of Labor said the number of
Americans filing for unemployment benefits decreased by 9,000.
Initial claims numbers came in at 346,000, marginally lower than
the consensus estimate of 345,000. The 4-week moving average
decreased to 345,750 from 348,500.
Meanwhile, the Bloomberg Consumer Confidence Index came in at
-28.3, higher than previous week's figure of -29.4. The index is
at its highest level since January 2008. Improvements in the
housing sector and better job conditions have boosted demand in
housing and the automobiles sector..
All the top ten S&P 500 industry groups posted gains among
which financial stocks emerged as the biggest gainer. The
Financial Select Sector SPDR (XLF) gained 1.4%. Stocks such as
Bank of America Corp (NYSE:
), Wells Fargo & Co (NYSE:
), JPMorgan Chase & Co. (NYSE:
), PNC Financial Services (NYSE:
) and U.S. Bancorp (NYSE:
) gained 2.0%, 1.3%, 1.2%, 0.6% and 0.6%, respectively.
The materials sector was the only loser. The Materials Select
Sector SPDR (XLB) lost 0.1%. Stocks such as Air Products &
Chemicals, Inc. (NYSE:
), Monsanto Company (NYSE:
), Praxair, Inc. (NYSE:
), Ecolab Inc. (NYSE:
) and Airgas, Inc. (NYSE:
) lost 2.8%, 2.1%, 0.9%, 0.3% and 0.9%, respectively.
AIR PRODS & CHE (APD): Free Stock Analysis
AIRGAS INC (ARG): Free Stock Analysis Report
BANK OF AMER CP (BAC): Free Stock Analysis
ECOLAB INC (ECL): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
MONSANTO CO-NEW (MON): Free Stock Analysis
PNC FINL SVC CP (PNC): Free Stock Analysis
PRAXAIR INC (PX): Free Stock Analysis Report
US BANCORP (USB): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
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