Benchmarks gained for the third-straight session on speculation that ECB might provide more stimulus measures to boost the Eurozone economy. The European Central Bank's (ECB) executive board has proposed a bond-buying program of about 50 billion euros per month in order to combat concerns over deflation in the Eurozone. ECB is expected to unveil a large-scale bond-buying program on Thursday to boost Eurozone's fragile economy. A rebound in oil prices and Bank of Canada's decision to cut interest rates also boosted investor sentiment.
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The Dow Jones Industrial Average (DJI) gained 0.2% to close at 17,554.28. The Standard & Poor 500 (S&P 500) went up 0.5% to close at 2,032.12. The tech-laden Nasdaq Composite Index closed at 4,667.42; gaining 0.3%. The fear-gauge CBOE Volatility Index (VIX) dropped 5.2% to settle at 18.85. A total of about 6.9 billion shares were traded on Wednesday, less than this month's average of 7.3 billion. Advancers outpaced declining stocks on the NYSE. For 62% stocks that advanced, 35% declined.
Reportedly, the ECB is considering quantitative easing program to revive the Eurozone economy. The ECB's Frankfurt-based executive board has proposed bond purchases of about $58 billion per month for at least this year. The board proposes to start the asset purchasing program from March. Eurozone had moved closer to deflation after consumer prices dropped annually in December. Consumer prices fell 0.2% year over year in December, for the first time in five years.
Investors welcomed the proposal and looked ahead to the ECB's meeting. However, ECB governing council member Ewald Nowotny said: "One should not get overexcited about it…Have a bit of a relaxed attitude to news and not to get too excited about the events of one day."
Oil prices moved north on Wednesday following expectations of ECB's stimulus measures. The stimulus package is expected to generate more demand for crude oil. The West Texas Intermediate (WTI) crude oil price gained 2.7% to settle at $47.78 per barrel. Additionally, price of Brent crude oil also advanced 2.1% to settle at $49.03 per barrel.
The Energy Select Sector SPDR (XLE) gained 2%, the highest among the S&P 500 sectors. Dow components Exxon Mobil Corporation ( XOM ) and Chevron Corporation ( CVX ) advanced 0.9% and 1.6%, respectively. Other key stocks from the sector including Schlumberger Limited ( SLB ), Kinder Morgan, Inc. ( KMI ), ConocoPhillips ( COP ) and EOG Resources, Inc. ( EOG ) increased 2.2%, 0.4%, 2.1% and 1.4%, respectively.
Meanwhile, the Bank of Canada's surprise rate cut added to the bullish sentiment. The Bank of Canada trimmed its interest rate by 25 basis points to 0.75% due to continuous slump in oil prices. The bank said plunge in crude oil prices are "unambiguously negative" for its economy. Abundant supply of oil has dragged oil prices down more than 50% since mid-June last year.
Coming to domestic events, shares of Netflix, Inc. ( NFLX ) surged 17.3% after the company reported fourth-quarter 2014 earnings of 72 cents per share that comfortably surpassed the Zacks Consensus Estimate of 44 cents. Netflix gained the most on the S&P 500.
UnitedHealth Group Incorporated ( UNH ) gained the most among the Dow components. Shares of the company went up 3.5% after the company posted fourth-quarter 2014 earnings of $1.55 per share, beating the Zacks Consensus Estimate of $1.50. On the other hand, International Business Machines Corporation ( IBM ) declined the most among the Dow components. Shares of IBM declined 3% after the company's fourth-quarter 2014 revenues of $24.1 billion missed the Zacks Consensus Estimate of $24.7 billion. However, fourth-quarter 2014 earnings per share of $5.81 turned out to be more than the Zacks Consensus Estimate of $5.41.
On the economic front, the U.S. Department of Commerce reported that privately-owned housing starts increased by 4.4% to 1,089,000 in December from November's revised tally of 1,043,000. December's numbers also exceeded the consensus estimate of 1,045,000. Single-family housing starts gained 7.2% in December to 728,000 from November's revised figure of 679,000. However, building permits decreased at a rate of 1.9% in December to 1,032,000, in contrast to the consensus estimate of building permits increasing to 1,070,000.
The SPDR S&P Homebuilders (XHB) gained 1%, the second highest among the S&P 500 sectors. Key homebuilder stocks including Toll Brothers Inc. ( TOL ), DR Horton Inc. ( DHI ), Lennar Corp. ( LEN ), PulteGroup, Inc. ( PHM ) and Beazer Homes USA Inc. ( BZH ) gained 0.8%, 2%, 2.2%, 1% and 1.2%, respectively. Overall, all 10 sectors of the S&P 500 ended in the green.
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