The key speech by Federal Reserve Chairman Ben Bernanke brought
cheer to the markets on Friday. Bernanke assured investors of
policy action by the central bank. However, the central bank is not
jumping into action right now, and that somewhat limited the gains.
Economists were also unsure if the central bank would implement
these economic measures when policy makers meet later in September.
Separately, economic readings on the domestic front were
The Dow Jones Industrial Average (DJI) had gained 151 points
during the session, but receded somewhat to end 90.13 points or
0.7% higher at 13,090.84. The Standard & Poor 500 (S&P 500)
gained 0.5% and finished Friday's trading session at 1,406.58. The
tech-laden Nasdaq Composite Index added 0.65 and closed at
3,066.96. The fear-gauge CBOE Volatility Index (VIX) dropped 2.0%
and settled at 17.47. Consolidated volumes on the New York Stock
Exchange, Nasdaq and American Stock Exchange were roughly 5.3
billion shares, lower than the year-on-year average of 6.6 billion
shares. Advancing shares enjoyed a better run over declining stocks
on the NYSE; as for 67% stocks that gained, 28% stocks closed
Through the week, volumes remained at record lows as investors
awaited Bernanke's speech on Friday. In fact, investors'
wait-and-watch attitude, since they were awaiting actions by
central banks, including U.S. Europe and even China, combined with
the summer holidays kept volumes sharply lower through August. Wall
Street Journal's data noted that the average daily volume in August
was 3 billion on NYSE; the lowest level since May 2007. As for the
Nasdaq, the average volume was at the lowest level since August
2005 at 1.54 billion shares. However, low volumes did not stop the
benchmarks from logging monthly gains, the third straight monthly
set of gains. In August, the Dow, S&P 500 and Nasdaq added
0.6%, 2% and 4.3%, respectively.
Coming back to Friday's developments, while all eyes were fixed
on what Bernanke had to say regarding the economic stimulus, his
speech was mostly in line with expectations. Hopes had been
initially high that Bernanke may boost economic measures. However,
strategists had later opined otherwise taking a cue from recent
encouraging economic readings. Housing figures were positive and
GDP data showed a slight advance in the second estimate from the
In fact, Zacks had said ahead of Bernanke's speech that while
the central bank head will refrain from making any definite
commitments, he would assess present economic conditions. That was
largely what happened as Bernanke spoke about his "grave concern"
in the domestic labor market and he did hint at economic measures
but not just yet. In his speech at Jackson Hole, Wyoming, Bernanke
said: "The stagnation of the labour market in particular is a grave
concern not only because of the enormous suffering and waste of
human talent it entails, but also because persistently high levels
of unemployment will wreak structural damage on our economy that
could last for many years".
As for additional economic measures, he said: "Taking due
account of the uncertainties and limits of its policy tools, the
Federal Reserve will provide additional policy accommodation as
needed to promote a stronger economic recovery and sustained
improvement in labor market conditions in a context of price
Bernanke's speech comes two weeks ahead of the Federal Open
Market Committee's (FOMC) meeting. However, the Street is not too
optimistic about the FOMC meeting announcing the implementation of
the third round of quantitative easing policy.
Separately, economic readings were on the brighter side on
Friday with factory orders and consumer sentiment both rising. As
for factory orders, U.S. Census Bureau reported that new orders for
manufactured goods rose 2.8% to $478.6 billion in July. This was
well ahead of e consensus estimates that projected a 1.6% increase.
Meanwhile, the Thomson Reuters/University of Michigan final
sentiment index was up to its best level in three months. The index
increased to 74.3 in August from 72.3 in July. This was also ahead
of consensus estimates of 73.5.
Coming to the individual sectors, materials and energy sector
were the biggest winners among S&P's 10 industry groups. The
Materials Select Sector SPDR (XLB) gained almost 1.0% and stocks
including Freeport-McMoRan Copper & Gold Inc. (NYSE:
), Southern Copper Corp (NYSE:
), Vale SA (ADR) (NYSE:
) and Mosaic Co (NYSE:
) gained 4.1%, 1.6%, 2.1% and 2.0%, respectively. As for the energy
sector, Energy Select Sector SPDR (XLE) was up 1.0% and stocks such
as Western Refining, Inc. (NYSE:
), Valero Energy Corporation (NYSE:
), Marathon Petroleum Corp (NYSE:
) and Chevron Corporation (NYSE:
) gained 1.6%, 1.7%, 1.9% and 1.1%, respectively.
CHEVRON CORP (CVX): Free Stock Analysis Report
FREEPT MC COP-B (FCX): Free Stock Analysis
MOSAIC CO/THE (MOS): Free Stock Analysis Report
MARATHON PETROL (MPC): Free Stock Analysis
SOUTHERN COPPER (SCCO): Free Stock Analysis
VALE SA (VALE): Free Stock Analysis Report
VALERO ENERGY (VLO): Free Stock Analysis Report
WESTERN REFING (WNR): Free Stock Analysis
To read this article on Zacks.com click here.