Stocks Logged Best Day of 2012 Amid Stimulus Hopes

Published on Wednesday, 06 June 2012 18:32 Written by Christopher Lynn

New York, June 6^th (TradersHuddle.com) – Stocks rallied, with both the Dow and the S&P 500 logging their best single day gains of the year. Participants bid equities higher, as they move into riskier assets amid speculation that the Fed and other central banks will provide further stimulus measures to compensate for the worsening debt crisis in Europe and weakening economic data.

The Dow Jones Industrial Average rallied 286.84 points, or 2.37%. The S&P 500 index gained 29.63 points, or 2.3%, while the NASDAQ jumped 66.61 points, or 2.4%.

The market started the session with solid gains, as futures held to their gains despite the ECB keeping its key interest rate steady at 1% and as the central bank failed to provide concrete action to tackle the worsening debt crisis in the euro zone. However, participants kept high hopes that eventually central banks around the world will provide additional stimulus measures in order to compensate for the impacts in the global economy of the debt crisis and slower growth in China.

A report from the Wall Street Journal actually fed into the speculation for further Fed action, as the Journal reported on dovish comments from Fed’s Charlie Evans and said that the Fed was considering more action amid the new economic recovery doubts.

Stocks added to their gains late in the session after San Francisco Fed President John Williams said the central bank must stand ready to provide further action to boost the struggling labor market. The broad rally helped all the S&P 500 sectors to end in positive ground, with both the Dow and the S&P 500 index logging their best single session gain for the year.

Energy, financials, and industrials logged the biggest gains, while defensive sectors like consumer staples and utilities posted the smallest gains, but still above 1%. The energy sector rallied more than 3% after crude oil prices received a boost of more than 1.8% amid a drop in the Dollar and speculation of QE3.

In the sector, Chesapeake Energy (NYSE: CHK) rallied the most in the sector, as shares jumped more than 7% to $18.21 amid news that the company was the company is in discussions to sell its stake in Chesapeake Midstream Partners (CHKM) & other pipeline assets that could be worth about $4 billion. The gains in the stock comes after yesterday the company agreed to replace four of its current board members and as it continues to look at ways to sell assets as the company faces a cash flow shortfall amid the drop in natural gas prices.

Not all was positive in the energy sector. Alpha Natural Resources (NYSE: ANR) tumbled to the bottom of the S&P 500, as shares lost more than 5% in the session amid concerns over Chinese demand. Meanwhile, Halliburton (NYSE: HAL), the provider of oilfield technologies and services to upstream oil and gas customers, tumbled more than 3% in the session after it warned of lower second quarter margin, amid weakness in the North American market.

Financials also benefited in the session. Bank of America (NYSE: BAC) surged more than 7% to $7.61, breaking above its 200day moving average at $7.18 and posting the biggest percentage gain in the Dow Jones Industrial Average. Morgan Stanley (NYSE: MS) was the best performer in the sector, logging the second biggest gain in the broad market index as shares rallied more than 8%. The stock advanced amid news that the firm together with Blackrock will acquire an Australian real estate loan portfolio from Lloyds and on a report that Morgan was considering a sale of its commodities trading division.

The industrial sector benefited from a surge in shares of Iron Mountain (NYSE: IRM) and gains in blue chip companies like United Technologies (NYSE: UTX) and Caterpillar (NYSE:CAT). Iron Mountain soared more than 13% to the top of the S&P 500 amid news that its board approved a plan to pursue the conversion to a REIT, while announcing an 8% increase in its quarterly dividend. Meanwhile, United Technologies jumped nearly 4%, while Caterpillar gained 3.6%.

In the technology space, Apple (NASDAQ: AAPL) gained 1.53% to $571.46, actually underperforming both the technology sector and the broad market. There were reports that Apple was looking to open 2 new store in China and yesterday, Cannacord Genuity said that it channel checks indicate that iPhone shipments are tracking inline with estimates for the quarter of 27 million units, a 23% sequential drop, as consumers delay purchases in anticipation of the new iPhone 5, which is expected to be announced and a launch sometime in the early fall. The stock closed below its calculated resistance at $581.50.

Meanwhile, Sprint Nextel (NYSE: S) logged the best gain in the tech sector, as shares rallied 7.5% amid news that its unit Virgin Mobile will soon offer a pay as you go iPhone.

Internet relates stocks also saw sharp gains. Facebook (NASDAQ: FB) rallied 3.64% to $26.81 after logging a new record low of $25.52. JMP Securities initiated coverage on the stock with Outperform and a target price of $37, while the NASDAQ announced a program for voluntary accommodations related to Facebook IPO cross. The plan calls for a $40 million fund to compensate some financial firms that lost money after Facebook's botched market debut on the exchange last month. The plan applies to sell orders at $42 or less that did not execute and buy orders at $42 executed but not confirmed.

Groupon (NASDAQ: GRPN) rallied more than 8% in the session after it was upgraded to a Hold from a Sell at Stifel Nicolaus, following the sharp recent decline in the share price.

In the consumer discretionary space, PulteGroup (NYSE: PHM) rallied 7.5% to $8.76 after it was upgraded to Outperform at Credit Suisse. While Home Depot (NYSE: HD) jumped 3.4% to $50.60 after the company reaffirmed guidance for the fiscal year and said that it has expanded its share buy back plan to $4 billion.

Elsewhere, Tempur-Pedic (NYSE: TPX) plunged 48.7% as the stock got crushed after the company slashed its full year earnings and revenue outlook amid increasing competition in the North American market.