The Dow and S&P 500 finished Thursday's trading on new
highs following Janet Yellen's comments during her Senate
confirmation hearing. Yellen suggested that the Federal Reserve's
soft monetary policy could continue until the economy shows signs
of significant strength. A couple of economic reports were
released yesterday. Initial claims slipped, declining for the
fifth time in a row. Among the S&P 500 industry groups,
financial stocks gained the most. Technology stocks were the only
sector to end in the red.
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) gained 0.4% to close the
day at 15,876.22. The S&P 500 increased 0.5% to finish
yesterday's trading session at 1,790.62. The tech-laden Nasdaq
Composite Index climbed 0.2% to end at 3,972.74. The fear-gauge
CBOE Volatility Index (VIX) declined 1.2% to settle at 12.37.
Consolidated volumes on the New York Stock Exchange were 3.14
billion shares. Advancing stocks outnumbered the decliners. For
63% shares that advanced, only 33% declined.
Much of the day's gains were a result of comments from Federal
Reserve Chairman nominee Janet Yellen. Speaking before the Senate
Banking Committee, Yellen said monthly bond purchases amounting
to $85 billion "cannot continue forever." However, she indicated
that the Federal Reserve's monetary policy would remain unchanged
for the present since the economy remained vulnerable.
Market watchers are of the opinion that tapering of bond
purchases may not begin in December as was earlier expected. Both
the S&P 500 and the Dow have gained appreciably over the year
on the back of the Fed's monetary stimulus. The S&P 500 has
gained nearly 25% and the Dow has increased 21% during the
period. Interest rates have remained low and investor sentiment
has been high for the better part of the year.
"I believe that supporting the recovery today is the surest path
to returning to a more normal approach to monetary policy," said
Yellen. "I consider it imperative that we do what we can to
promote a strong recovery," said Yellen, replying to a question
during her hearing before the Senate Banking Committee. She
added: "It's important not to remove support, especially when the
recovery is fragile and tools available to monetary policy,
should the economy falter, are limited given that short-term
interest rates are at zero".
Shares of Cisco Systems, Inc. (NASDAQ:
) dropped nearly 13% on Thursday, after the company forecasted a
sharp drop in revenues for the current quarter, between 8% and 10
%, compared to a year ago. The company reported revenues of $12.1
billion, falling short of its own forecast. These developments
pulled down the technology group of the S&P 500, which fell
Wal-Mart Stores, Inc. (NYSE:
) bounced back after earlier losses, increasing 0.2% to close at
$79.08. Shares of the company had declined earlier after the
company reported lower-than-expected quarterly sales. Wal-Mart
said comparable sales at its U.S. stores dropped 0.3 % in the
third quarter due to reduced prices of televisions, toys and
Coming to government data, the U.S. Department of Labor released
initial jobless claims numbers. According to the report, initial
claims dropped 2,000 to 339,000 from the prior week's revised
figure of 341,000. This was considerably above the consensus
estimate of 331,000. The four-week moving average was 2,866,250,
a decline of 2,000 from the preceding week's revised average of
Additionally, the Department of Commerce released trade data for
the month of September. Exports came in at $188.9 billion
while imports stood at $230.7 billion. This resulted in a goods
and services deficit amounting to $41.8 billion, up from $38.7
billion, the revised figure for August. Additionally, according
to the Bureau of Labor Statistics, nonfarm business sector labor
productivity increased by 1.9% during the third quarter of 2013,
higher than the consensus estimate of 1.8%.
The financial sector was the biggest gainer among the S&P 500
industry groups and the financial sector SPDR (XLF) gained 0.9%.
Stocks such as Wells Fargo & Co (NYSE:
), Berkshire Hathaway Inc. (NYSE:BRK.B), JPMorgan Chase & Co.
), Bank of America Corp (NYSE:
), and Citigroup Inc. (NYSE:
) added 0.8%, 0.8%, 0.5%, 1.1%0.4%, respectively.
The technology sector was the only losing sector among the
S&P 500 industry groups and the technology sector SPDR (XLK)
declined 0.3%. Shares such as Microsoft Corporation (NASDAQ:
), International Business Machines Corp. (NYSE:
), Oracle Corporation (NYSE:
), and Intel Corporation (NASDAQ:
) declined 0.4%, 0.7%, 1.8%, and 0.9% respectively.