Expectations that the Federal Reserve would continue with its
monetary stimulus program propelled benchmarks to new highs.
However, no other major catalysts or developments could move the
markets. Meanwhile, the budget deficit forecast for 2013 has been
reduced. Household debt, which climbed up sharply during the
crisis, has fallen back to pre-recessionary levels. All the top
ten S&P 500 industry groups finished in the green among which
financials stocks gained the most.
The Dow Jones Industrial Average (DJI) gained 0.8% to close
the day at 15,215.25. The S&P 500 gained 1.0% points to
finish yesterday's trading session at 1,650.34. The tech-laden
Nasdaq Composite Index rose 0.7% to end at 3,462.61. The
fear-gauge CBOE Volatility Index (VIX) increased 1.8% to settle
at 12.77. Consolidated volumes on the New York Stock Exchange,
American Stock Exchange and Nasdaq were roughly 6.2 billion
shares, marginally below 2013's average of 6.36 billion shares.
Advancing stocks outnumbered the decliners. For the 63% that
advanced, 34% declined.
Since the start of 2013, investor optimism and the Federal
Reserve's monetary stimulus program have been primarily
responsible for the market rally. The Fed's monetary stimulus has
been largely successful in reviving the job market and household
markets. However, in the last three sessions, markets have just
gained 0.1% in the absence of any major economic reports or
catalysts. The S&P 500 has gained 16% since the start of
2013. Tuesday's trading session also witnessed the Nasdaq
reaching an all-time high of 3,468.67. Now that the earnings
season for the first quarter is almost over and no major economic
reports are due, a continuation of the rally seems
Yesterday's gains were led by investors' expectations that the
Fed will continue to purchase $85 billion worth of bonds every
month to keep the economy going. These expectations surfaced in
spite of the concerns which had arisen during the last Fed
meeting on whether or not the bond buying program should be
continued. Tuesday's session was dominated by substantial of
large cap companies based on these expectations.
Meanwhile, according to a government report released
yesterday, the budget deficit for 2013 is expected to be lower
compared to the figure projected a couple of months ago. The
Congressional Budget Office expects the 2013 budget deficit to be
$642 billion compared to $845 billion, which was predicted in
early 2013. This new figure is 4% of the country's economy. In
percentage terms, this figure is much less than the 10.1% which
was recorded during the midst of the financial crisis in 2009,
when the budget deficit came in at $1.4 trillion.
Since the past four years, the budget deficit has been in the
trillion-dollar club. But the figure has now gone down below the
trillion-dollar mark. Assuming that this trend continues, 2015
budget deficit is expected to be $378 billion or 2.1% of the
According to a report released by the Federal Bank of New
York, U.S. Households debt was recorded at $11.2 trillion, about
1% lower than the $12.7 trillion recorded during the financial
crisis of 2008. This figure has also reached its lowest level
since 2006. According to the report, the fall in the household
debt is attributable to the fall in the delinquency rates.
Delinquency rates on mortgages, credit cards and home equity
loans dropped by 0.2%, 0.4% and 0.5%, respectively.
Of the top ten S&P 500 industry groups, financial stocks
gained the most. The Financial Select Sector SPDR (XLF) gained
1.7%. Stocks such as Bank of America Corp (NYSE:
), JPMorgan Chase & Co. (NYSE:
), Goldman Sachs Group, Inc. (NYSE:
), Wells Fargo & Co. (NYSE:
) and Citigroup Inc. (NYSE:
) gained 2.8%, 1.1%, 3.3%, 1.5% and 2.4%, respectively.
BANK OF AMER CP (BAC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis
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WELLS FARGO-NEW (WFC): Free Stock Analysis
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