Comments from Federal Reserve chairman Ben Bernanke pushed the
markets higher yesterday, as investors grew hopeful that the
central bank would support the economy further. A few economic
reports, which came in somewhat weak, could hardly impact the
Benchmarks' rally.
The Dow Jones Industrial Average (DJI) gained 1.2% and closed
the day at 13,241.63. The Standard & Poor 500 (S&P 500) was
up 1.4% and finished yesterday's trading session at 1,416.51. The
tech-laden Nasdaq Composite Index once again outperformed fellow
benchmarks as, jumping 1.8% to finish at 3,122.57. The fear-gauge
CBOE Volatility Index (VIX) dropped 3.8% to settle at 14.26.
Advancers outshined the decliners on the New York Stock Exchange,
as for 74% of the gainers, 23% stocks traded lower. The remaining
3% stocks were left unchanged. Total volume on the NYSE was 3.58
billion shares.
Ben Bernanke single-handedly drove investor sentiment higher
yesterday, though he struck a cautious note about the labor market.
He called the drop in unemployment as "somewhat out of sync" with
economic growth and noted that the recent trend of an improving
labor market could be linked to the fact that companies were
adjusting their employee structure after the recession. In his
speech at the National Association for Business Economics, Bernanke
said: "To the extent that this reversal has been complete, further
significant improvements in the unemployment rate will likely
require a more rapid expansion of production and demand from
consumers and businesses, a process that can be supported by
continued accommodative policies".
While he suggested economic growth is required for the
unemployment rate to decline appreciably, investors sensed better
support from the central bank to the economy and were hopeful about
the easy money policy. Bernanke commented: "Further significant
improvements in the unemployment rate will likely require a more
rapid expansion of production and demand from consumers and
businesses, a process that can be supported by continued
accommodative policies".
For a long time now, investors have been waiting for the third
round of the bond-buyback plan. However, the Fed has never lived up
to their expectations and Fed minutes on the past occasions
suggested the central bank was divided over the third round of
quantitative easing (QE3). Previous bond purchase plans had boosted
the markets significantly, reflected markets' proclivity for the
liquid money. This time, Bernanke did not mention anything about
QE3, but the "accommodative policies" that he spoke about left
investors' hopeful about an easy money policy going forward.
On the economic front, the National Association of Realtors
reported that pending home sales dropped in February, According to
the report, Pending Home Sales Index dropped 0.5% from 97.0 in
January to 96.5 in February. Lawrence Yun, NAR chief economist,
said: "The spring home buying season looks bright because of an
elevated level of contract offers so far this year…If activity is
sustained near present levels, existing-home sales will see their
best performance in five years. Based on all of the factors in the
current market, that's what we're expecting with sales rising 7 to
10 percent in 2012".
Coming to sectoral stocks, the Technology SPDR Select Sector
Fund (
XLK
) gained 1.5% and stocks including, Apple Inc. (NASDAQ:
AAPL
), International Business Machines Corp. (NYSE:
IBM
), Oracle Corporation (NASDAQ:
ORCL
), Microsoft Corporation (NASDAQ:
MSFT
) and Red Hat, Inc. (NYSE:
RHT
) increased 1.8%, 1.1%, 2.1%, 1.8% and 2.4%, respectively.
APPLE INC (
AAPL
): Free Stock Analysis Report
INTL BUS MACH (
IBM
): Free Stock Analysis Report
MICROSOFT CORP (
MSFT
): Free Stock Analysis Report
ORACLE CORP (
ORCL
): Free Stock Analysis Report
RED HAT INC (RHT): Free Stock Analysis Report
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