Benchmarks surged on Thursday to end in the green following strong gains in financial stocks and easing rate hike fears. Encouraging third quarter earnings results from Citigroup and a strong recovery in shares of Goldman Sachs boosted financial sector. Meanwhile, reduced rate-hike concerns following dismal inflation data along with other discouraging economic data also helped markets to register strong gains yesterday. Also, jump in healthcare stocks boosted investor sentiment. While the Dow reached its highest level since Aug 19, the S&P 500 climbed to the best level since Aug 20.
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The Dow Jones Industrial Average (DJI) jumped 1.3%, or 217 points, to close at 17,141.75. The Standard & Poor's 500 (S&P 500) gained 1.5% to close at 2,023.86. The tech-laden Nasdaq Composite Index closed at 4,870.10, rising 1.8%. The fear-gauge CBOE Volatility Index (VIX) plunged 11% to settle at 16.05. A total of around 7 billion shares were traded on Thursday, lower than the last 20-sessions' average of 7.6 billion. Advancers outpaced declining stocks on the NYSE. For 79% stocks that advanced, 18% declined.
Shares of Citigroup Inc. ( C ) gained 4.4% after announcing a year-on-year jump of nearly 38% in third quarter adjusted earnings per share to $1.31, a couple of cents higher than the Zacks Consensus Estimate. Significant decline in legal and repositioning costs aided Citigroup to overcome revenue pressure. However, adjusted revenues of Citigroup declined 8% year over year to $18.50 billion, missing the Zacks Consensus Estimate of $18.76 billion.
Also, The Goldman Sachs Group, Inc.'s ( GS ) shares recovered strongly from earlier losses to post a gain of 3% despite reporting disappointing third quarter earnings results. The company reported earnings per share of $2.90, missing the Zacks Consensus Estimate of $3.08. Moreover, it compared unfavorably with the year-ago figure of $4.57. Goldman's net revenue slumped 18% year over year to $6.9 billion in the quarter, also lagging the Zacks Consensus Estimate of $7.3 billion. Gains in Goldman Sachs also boosted the Dow in yesterday's trading.
Strong gains in these two financial behemoths helped the Financial Select Sector SPDR (XLF) to gain 2.3%. It was the best performer among the S&P 500 sectors. Key stocks from the sector including Bank of America Corporation ( BAC ), Morgan Stanley ( MS ), JPMorgan Chase & Co. ( JPM ), The Bank of New York Mellon Corporation ( BK ) and KeyCorp ( KEY ) gained 3.5%, 3.3%, 3.2%, 3.1% and 4.7%, respectively.
Strong gains in biotech and healthcare stocks also aided the benchmarks' uptrend. While the iShares Nasdaq Biotechnology ETF (IBB) jumped 4.4%, the Health Care Select Sector SPDR ETF (XLV) gained 2.2%. Healthcare was the second biggest gainer among the S&P 500 sectors. Key stocks from the sector including Alexion Pharmaceuticals, Inc ( ALXN ), Biogen Idec Inc ( BIIB ), Celgene Corporation ( CELG ), Gilead Sciences, Inc ( GILD ) and Amgen Inc ( AMGN ) gained 5.5%, 4.5%, 3.3%, 3.3% and 3.2%, respectively.
However, shares of UnitedHealth Group Incorporated ( UNH ) declined 1.6% despite reporting better-than-expected third quarter earnings results. The company reported third-quarter 2015 earnings of $1.65 per share, beating the Zacks Consensus Estimate by a couple of cents. Quarterly revenue of $41.5 billion also came higher than the Zacks Consensus Estimate of $39.9 billion. It was the biggest loser among the Dow components.
Separately, the Labor Department reported that Consumer Price Index (CPI) declined 0.2% in September, in line with the consensus estimate. It was preceded by a 0.1% decline in August. Slump in gasoline prices was the main reason behind the decline. However, core CPI, which excludes food and energy prices, gained 0.2% last month, higher than the consensus estimate of a 0.1% gain.
Additionally, the New York Fed reported that Empire State manufacturing index - an indicator of business activity in the region - finished in negative territory for third-consecutive month in October. The reading came in at -11.36 in October, wider than the consensus estimate of -7.5. Moreover, manufacturing activity in Philadelphia declined for the second consecutive month in October. The Philadelphia Fed manufacturing index witnessed a reading of -4.5 this month, compared to the consensus estimate of -1.
These disappointing economic data raised doubts about attaining the Fed's 2% inflation rate target, which in turn helped to reduce the possibility of a rate hike in October's meeting. Moreover, the New York Fed President William Dudley indicated yesterday that he will support a lift-off this year given that the economy is on the track to achieve the Fed's targets regarding growth, employment and inflation. However, he also said that recently released economic data signaled slowdown in the US economy and stronger dollar and weak global economic environment are restricting the US economy to grow at a solid pace.
However, the Labor Department reported that jobless claims declined by 7,000 in the week ending Oct 10 to 255,000, in line with the lowest tally since 1973. It was also lower than the consensus estimate of 271,500. Also, the 4-week moving average decreased by 2,500 to 265,000 in the week, touching the lowest level since Dec 15, 1973.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
