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:
), The Home Depot, Inc. (NYSE:
), Pfizer Inc. (NYSE:
), The Travelers Companies, Inc. (NYSE:
), Verizon Communications Inc. (NYSE:
) gained 1.6%, 1.0%, 1.7%, 1.1% and 0.8%, respectively.
However, another Dow component, Cisco Systems, Inc. (NASDAQ:
) 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
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
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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