Dow and S&P 500 Logged Best Weekly Gains of the Year

Published on Friday, 08 June 2012 17:25 Written by Christopher Lynn

New York, June 8^th (TradersHuddle.com) – Stocks gained for the session, logging sharp gains for the week. The S&P 500 and the Dow logged their best weekly performances for the year helped by optimism that European leaders will approve a plan to recapitalize Spain’s struggling banking system over the weekend. Participants continued to digest news of China’s rate cut and comments from Bernanke, which dampened hopes of swift action from the Fed to prop up the U.S. economy.

The Dow Jones Industrial Average gained 93.24 points, or 0.75%. The S&P 500 index climbed 10.65 points or 0.81%, while the NASDAQ jumped 27.40 points, or 0.97%.

For the week, the Dow jumped 3.59%, while the S&P 500 rallied 3.72% and the NASDAQ surged 4.04%.

The market started with modest losses amid reports that Spain will request financial aid to recapitalize its struggling banking system. European stocks were under pressure, reacting to Fitch’s downgrade of Spain’s credit rating by two notches and as hopes for swift action from the Fed eased.

On economic data, the U.S. trade deficit narrowed in April to $50.1 billion, with both imports and exports logging their second highest level on record. Meanwhile, wholesale inventories climbed 0.6% to a record of $483.5 in April.

Stocks garnered support as participants look at the prospects that European policymakers will get closer to tackle the immediate crisis in Spain by approving a bank recapitalization plan for the country over the weekend. The market moved to the upside, which helped the Dow and the S&P 500 to log their best week for the year, rebounding sharply from their worst weekly performance of 2012.

The upside move was broad based with all of the S&P 500 sectors closing in positive territory. Financials, technology, and consumer discretionary logged the best performances for the session, while energy and utilities closed with small gains.

Financials benefited from the speculation over the Spanish banking system bailout. Citigroup (NYSE: C) rallied the most in the sector, jumping 3.2% and breaking above its calculated resistance at $27.70. The stock rebounded along other financials from the losses in the prior session after the Fed announced new capital rules. Rival Bank of America (NYSE: BAC) was among the top Dow components for the session and the week. Shares of BofA gained 1.9% to $7.56, closing above calculated resistance at $7.45.

Facebook (NASDAQ: FB) jumped 3% to $27.10 after trading as high as $27.76 after the company announced the roll out of its App Center, where its nearly 1 billion users can access social apps that have been reviewed by the company. The stock also saw upside after a report from ComScore suggested that marketers could use the site effectively to encourage users to buy products. Facebook shares fell for the third straight week, down 2.2%.

Shares of Facebook continued to struggle amid the after shocks from the botched IPO. According to CNBC, UBS (NYSE: UBS) is planning to sue the NASDAQ OMX (NASDAQ: NDAQ) to try to recoup its losses in Facebook trading that might be as high as $350 million. Facebook logged a record low of $25.52 on Wednesday, which appears to be a level in which the stock received a decent amount of support.

Technology saw a boost from strong Sprint Nextel’s (NYSE: S) performance. The stock surged to the top of the S&P 500, rallying 8.8% to $2.98. Sprint benefited from a mention by Jon Najarian on CNBC, which said that he ID unusual call buying on the space, particularly around the news that Sprint’s unit Virgin Mobile would start selling a pre-paid iPhone later in the month.

Meanwhile, Apple (NASDAQ: AAPL) gained 1.5% to $580.32, closing just below its calculated resistance at $581.50. Apple climbed 3.4% for the week, ending near its 50day moving average at $584. According to some reports, the company might seek a legal order to ban the launch of Samsung’s new Galaxy smartphone in the U.S.

On the flip side, NetApp (NASDAQ: NTAP) tumbled more than 3%, logging one of the biggest declines in the S&P 500. The stock was downgraded to Equal Weight from Overweight at Barclays.

Consumer stocks were also on the move. Wal-Mart (NYSE: WMT) rallied 3.57% to $68.22, posting the biggest percentage gain in the blue chip index and hitting a new 12-year high at $68.23. Meanwhile fast food stocks McDonald’s (NYSE: MCD) and Yum Brands (NYSE: YUM) were under pressure.

McDonald’s slid 0.7%, posting the biggest decline in the Dow after the company reported disappointing global same-store sales growth of 3.3% in May, hurt by weaker sales in China and Japan. Rival Yum Brands, which has the biggest exposure to China, slumped more than 3% in the session on reaction to the news and as fears increased over a hard landing in China.

Homebuilders were once again a force to the upside, with D.R. Horton (NYSE: DHI) jumping 2.8% and PulteGroup (NYSE: PHM) gaining 1.1%, as both stocks were upgraded to a Buy at Citigroup.

Elsewhere in the industrial space, FedEx (NYSE: FDX) climbed 1.7% to $87.57 amid a drop in crude oil prices and after the company announced a shipping rate increase of 6.9% effecting July 9^th. W.W. Grainger (NYSE: GWW) jumped more than 2% to $189.98 after it was upgraded to a Buy at UBS.

And Navistar (NYSE: NAV) soared 17.6% to $28.36, rebounding from its sharp drop in the prior session following a quarterly loss and lower guidance for the year. The stock however received a boost in today’s session from news that investor Carl Icahn increase his stake in the truck and engine maker to 11.87% from 9.99%.