Benchmarks recorded their biggest gains this year following news
that leaders were considering ways to boost the flagging economies
both here and across the Atlantic. The Atlanta Federal Reserve
President spoke of further monetary easing if the U.S. economy
continues to suffer and the European economic scenario turns worse.
Further, there was more encouragement from the other side of the
pool as European officials were reported to be considering plans to
rescue Spanish Banks. Investor sentiment has been dampened by
lingering economic woes for quite some time now. Thus, the
slightest positive hint regarding the economic scenario helped
markets to soar and touch new highs for the year.
The Dow Jones Industrial Average (DJI) soared 286.84 points or
2.4% to close at 12,414.79. The Standard & Poor 500 (S&P
500) jumped 2.3% and finished yesterday's session almost 30 points
higher at 1,315.13. The tech-laden Nasdaq Composite Index surged
2.4% and was up to 2,844.72. The Street was decently busy on a day
of such robust gains as consolidated volumes on the New York Stock
Exchange, the Nasdaq and the American Stock Exchange were roughly
7.36 billion shares, higher than the year-to-date daily average of
6.85 billion shares. Advancing stocks on the NYSE stormed past the
decliners; as for 13 stocks that gained, a couple of stocks ended
in the red zone.
Investors finally witnessed robust gains after consistent
sessions of declines and minimal increases. The Dow's 286-point
jump was the best one-day performance since December 20 last year.
Moreover, the blue-chip index is back in positive territory for the
year and is now trading 1.6% higher for 2012. The S&P 500 too
shared the laurels as it recorded its best one-day gains for the
year so far. All of the 10 industry groups of the S&P 500
finished in the green and market onlookers opined that after the
severe fall the time was 'ripe for a rebound'.
Last Friday, investor sentiment was dampened by dismal domestic
jobs data, which eventually led to one of the year's largest drops
for the indices. Taking a cue from the murky jobs market, Atlanta
Fed President Dennis Lockhart noted that the labor markets exposed
the "halting and tenuous" economic recovery. Also, GDP numbers in
the U.S. have showed a slower pace of growth and other economic
readings have also been mostly disappointing off late. In such a
scenario, Dennis Lockhart added: "Should it become clear that
something resembling my baseline scenario of continued, though
modest, growth is no longer realistic, further monetary actions to
support the recovery will certainly need to be considered".
San Francisco Fed President John Williams lent further support
to this argument, emphasizing the impact of the European crisis. He
said: "It's crucial that we maintain our current highly stimulatory
monetary policy stance…We must also stand ready to do even more if
needed to best achieve our statutory goals of maximum employment
and price stability". The comments from these two heads came ahead
of Fed Chairman Ben Bernanke's testimony before Congress on
Meanwhile, European Union officials and Germany are examining
ways to rescue the beleaguered Spanish banks according to sources.
These two bodies were reportedly considering lending money from the
European bailout fund to rescue these banks. Amidst hopes of the
wobbly economy getting some stimulus, the European Central Bank
left the interest rate unchanged. Mario Draghi, the ECB President,
said the European debt crisis is "far away" from the tumultuous
scenario of the Lehman Brothers' collapse. However, he said that if
required, the ECB is "ready to act" and commented: "I don't think
it would be right for monetary policy to fill other institutions'
lack of action".
With such robust gains and hopes of the economy getting a much
needed boost, the financial sector was a big gainer yesterday and
the Financial Select Sector (XLF) jumped 3.0%. Financial
bellwethers including American Express Company (NYSE:
), Bank of America Corp (NYSE:
), Citigroup Inc. (NYSE:
), JPMorgan Chase & Co. (NYSE:
) and Morgan Stanley (NYSE:
) soared 2.6%, 7.6%, 5.4%, 3.4% and 8.4%, respectively.
AMER EXPRESS CO (AXP): Free Stock Analysis
BANK OF AMER CP (BAC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis Report
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