Benchmarks rose to new multi-year highs on Friday after the
Federal Reserve announced big plans to boost the economy. The gains
came despite investor concerns about the extent to which the Fed
can fix the economy and combat the high unemployment rate. Several
economic reports released on Friday also helped to justify the
Fed's decision to initiate a bond buying program. The Dow and the
S&P 500 were at their best levels since December 2007, and the
Nasdaq soared to its highest level since November 2000.
The Dow Jones Industrial Average (DJI) gained 53.51 points or
0.4% to end at 13,593.37. The Standard & Poor 500 (S&P 500)
surged 0.4% to finish Friday's trading session at 1,465.77. The
tech-laden Nasdaq Composite Index surged almost 0.9% to close at
3,183.95. The fear-gauge CBOE Volatility Index (VIX) surged 3.27%
to settle at 14.51. Total volumes on the New York Stock Exchange,
Nasdaq and the American Stock Exchange amounted to roughly 8.45
billion shares, higher than last year's daily average of 7.84
billion shares. Advancers outpaced the declining stocks on
the NYSE; as for 66% stocks that gained, only 30% stocks closed
Following the robust gains on Thursday, benchmarks enjoyed yet
another good session as the announcement of the third round of
quantitative easing (QE3) policy continued to boost the markets.
The announcement about QE3 comes after months of anticipation.
Moreover, the central bank did not restrict the purchase of
mortgage debt within a specific time frame. The Fed announced that
it will buy back mortgage-backed securities worth $40 billion every
month till labor conditions improve.
For the past several trading sessions, volumes had been low as
investors had adopted a cautious stance awaiting action by the
central bank. However, the announcement of QE3 drove volumes beyond
the yearly average for the second consecutive day. More
importantly, the announcement brought cheer to investors who were
awaiting the economic stimulus for months.
The economic reports released on Friday were Industrial
Production, Business Inventories, Retail Sales and Consumer Price
Index (CPI). The U.S. Department of Commerce reported data on
business inventories and noted a 0.8% rise in manufacturers' and
trade inventories to an estimated end-of-month level of $1,592.0
billion in July, the largest gain in six months.
The Board of Governors of the Federal Reserve System reported
that industrial production dropped 1.2% in August, the highest
since March 2009, following a rise of 0.5% in July. As output was
restrained in the Gulf Coast region during the late August due to
Hurricane Isaac, total industrial production fell by 0.3%.
The U.S. Bureau of Labor Statistics reported that the Consumer
Price Index for All Urban Consumers (CPI-U) had gained 0.6% in
August, after remaining flat last month. Excluding food and energy,
the index edged up 0.2% in August. Separately, retail sales
increased 0.9% in August. This was the best jump in the last six
months. High automobile demand and a rise in gasoline prices
ultimately meant consumers could spend little on other goods.
Meanwhile, the health insurer UnitedHealth Group Inc. (NYSE:
) replaced food and snacks company Kraft Foods Inc (NASDAQ:
) on the Dow Jones index, because Kraft will become a smaller
company after it divests its North American grocery business. This
change will take effect from September 24th.
Among the sectors, housing was a major gainer and the SPDR
S&P Homebuilders (XHB) soared 2.1%. Among the stocks, KB Home
), The Ryland Group, Inc. (NYSE:
), Lennar Corporation (NYSE:
), D.R. Horton, Inc. (NYSE:
), PulteGroup, Inc. (NYSE:
) and NVR, Inc. (NYSE:
) jumped 5.7%, 5.7%, 3.8%, 3.3%, 3.1% and 0.9% respectively.
D R HORTON INC (DHI): Free Stock Analysis
KB HOME (KBH): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis
LENNAR CORP -A (LEN): Free Stock Analysis
NVR INC (NVR): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis
RYLAND GRP INC (RYL): Free Stock Analysis
UNITEDHEALTH GP (UNH): Free Stock Analysis
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