Stocks Extend Rally on Central Bank Put
Published on Friday, 15 June 2012 18:18 Written by Christopher Lynn
New York, June 15th (TradersHuddle.com) – Stocks jumped on the day, ending near the highs of the session and logging gains for the week. The Dow broke above its 50day moving average, as it became clear that central banks around the world are ready to act, injecting liquidity, in an event of an adverse outcome in the Greek elections over the weekend. Another dose of weak data in the U.S. added fuel to hopes that the Fed will provide further easing to stimulate growth.
The Dow Jones Industrial Average gained 115.26 points, or 0.91%. The S&P 500 index jumped 13.74 points or 1.03%, while the NASDAQ rallied 36.47 points, or 1.29%.
For the week, the Dow rallied 1.70%, while the S&P 500 jumped 1.30% and the NASDAQ gained 0.50%.
The market started near the flat line, despite good performance by overseas markets on increased expectations for Central Bank action in the event of an adverse outcome in the Greek elections. U.S. data continued to point towards a slowdown, with a weaker than expected Empire State Manufacturing index reading, which put the index at its lowest level since November.
Additional data, showed that consumer sentiment tumbled to a 6-month low in June and industrial production slipped in May. However, stocks garnered support amid the reports that cited G20 officials, which will be meeting in Mexico next week, saying that central banks are ready to inject liquidity to the markets in case the election results increase the risk for Greece to leave the euro zone. Additionally, hopes that the Fed will react to the slew of weak economic data in the U.S. boosted performance.
The upside move ended near the highs of the session, with all of the S&P 500 sectors ending in positive territory. Energy, financials, materials, and technology logged the biggest gains, while the defensive sectors, like staples lagged.
Energy was helped by slightly higher crude oil prices. The sector jumped nearly 2%, as WPX Energy (NYSE: WPX) rallied 5.9% to $14.79, logging the best performance in the S&P 500 Index. Chesapeake Energy (NYSE: CHK) jumped more than 4%, while Chevron (NYSE: CVX) gained 2.4%, posting the second biggest gain in the Dow Jones Industrial Average.
Financials saw upside, as fears over bank runs in Europe eased, while hopes of additional stimulus from the Fed kept an underlying support for the sector, despite Moody’s downgrading 11 European banks. Bank of America (NYSE: BAC) rallied more than 3% to $7.90, posting the biggest percentage gain in the Dow Jones Industrial Average and breaking above its 50day moving average at $7.86. Rival Citigroup (NYSE: C), which according to Bernstein has the most correlation with Europe of any of the big banks, reversed from losing more than 1% earlier in the session to gain 1.43% to $28.31.
The gains in the technology sectors helped the tech heavy NASDAQ and the S&P 500. Frontier Communications (NYSE: FTR) rallied to the top of the sector, logging the second best performance in the broad market index. Meanwhile, SAIC (NYSE: SAI) jumped 5% after the stock was upgraded to Overweight at JPMorgan.
Apple (NASDAQ: AAPL), once again underperformed. The stock gained 0.45% to $574.13, as the stock continues stuck in a range between $560 and $580, as participants wait for key new product announcements later in the year, including the iPhone 5, the likely iTV the possible iCamera, and a smaller iPad. Apple’s 50day moving average at $579.95 looms large as the next key resistance level. For the week, Apple lost 1.1%
Also in the sector, Microsoft (NASDAQ: MSFT) jumped 2.3%, posting the third biggest gain in the blue chip index amid news that the company will acquire the enterprise social network Yammer, which launch in 2008, for about $1 billion.
The Microsoft acquisition news, coupled with news that Facebook (NASDAQ: FB) will file to consolidate all of the shareholder lawsuits involving its botched IPO, and the appearance that shares bottomed last week at $25.52, helped spur a big rally on Facebook. Shares closed above $30 per share, rallying more than 6%. For the week, the stock jumped more than 10%.
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