Stock Market News for May 11, 2012 - Market News

By Zacks Equity Research,

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A drop in initial claims came to markets' rescue and the upward rally yesterday was further supported by news of Spain taking over Bankia SA which had a large debt burden. Even though the gains were only marginal, the Dow finally broke its six-day losing streak, the longest since the one ending on August 2, 2011. However, lower-than-estimated profit expectations from Cisco dragged the company's shares as well as the Nasdaq into the red.

The Dow Jones Industrial Average (DJI) increased 0.2% to end at 12,855.04. The Standard & Poor 500 (S&P 500) gained 0.3% and finished yesterday's trading session at 1,357.99. The tech-laden Nasdaq Composite Index was unfortunately failed to finish in the green, declining by 0.04% to close at 2,933.64. The fear-gauge CBOE Volatility Index (VIX) slumped 6.2% to settle at 18.83. Consolidated volumes on the New York Stock Exchange, the Nasdaq and the American Stock Exchange were 6.59 billion shares, just shy of the 50-day moving average of 6.65 billion shares. The advancers had a better day than declining stocks on the NYSE; as for every two stocks that traded lower, more than three stocks ended in the green.

The Dow was up almost by 100 points during the day. Then, it lost all of its gains during the final minutes, but rebounded yet again and finally settled in the green. The gains might look weak; more so in comparison to its near 100 point- surge in the day. However, what mattered most was that it snapped its six-day losing streak.  Among the 30 Dow components, 19 stocks managed a finish in the green and stocks including Chevron Corporation (NYSE: CVX ), The Home Depot, Inc. (NYSE: HD ), Pfizer Inc. (NYSE: PFE ), The Travelers Companies, Inc. (NYSE: TRV ), Verizon Communications Inc. (NYSE: VZ ) gained 1.6%, 1.0%, 1.7%, 1.1% and 0.8%, respectively.

However, another Dow component, Cisco Systems, Inc. (NASDAQ: CSCO ) slumped 10.5% and limited Dow's gains. The more than 10% slump had a larger impact on the tech-laden Nasdaq as it was left languishing in the red. Cisco came out with a profit forecast that was below the Street estimates and its shares instantly registered their biggest drop since February last year.

Luckily there was good news on other fronts that helped the benchmarks, apart from the Nasdaq, finish in the green. It was the drop in initial claims that was widely cheered as investors were obviously happy to learn receive positive news, that too from the labor market, amidst the drudgery that the financial markets have been vulnerable to since the past few days. The U.S. Department of Labor reported that the advance figure for seasonally adjusted initial claims dropped 1, 000 from previous week's revised figure of 368,000, to 367,000 in the week ending May 5. This was however slightly above consensus estimates of 366, 000.

Separately, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis came out with trade deficit figures, which were not as promising. According to the report: "Total March exports of $186.8 billion and imports of $238.6 billion resulted in a goods and services deficit of $51.8 billion, up from $45.4 billion in February, revised".

Contrary to recent trends, Europe lent support to the markets good after Spain said that it will take over the nation's fourth-largest bank, which was reeling under a heavy debt burden. The Spanish government confirmed in a statement that €4.5 billion worth of funds provided to Bankia SA in 2010 and 2011 will be translated into shares of the parent company of the bank. Following the takeover, Spain will own 45% of Bankia SA. It was a move that was definitely aimed at regaining and strengthening investors' confidence in the nation's finances. It also seemed to suggest that it does not need a bailout. Spain's 10-year yield eased 0.12 percentage points, a signal greeted warmly by investors.

CISCO SYSTEMS (CSCO): Free Stock Analysis Report
CHEVRON CORP (CVX): Free Stock Analysis Report
HOME DEPOT (HD): Free Stock Analysis Report
PFIZER INC (PFE): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing US Markets
Referenced Stocks: CSCO , CVX , HD , PFE , TRV

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