Stocks Gain to One-Month High amid Fed Hopes
Published on Tuesday, 19 June 2012 18:54 Written by Christopher Lynn
New York, June 19th (TradersHuddle.com) – Stocks jumped to a one-month high as participants hoped that the Fed would act to prop up the sluggish U.S. economy, following its two-day meeting. European woes remained in focus as the G20 leaders focused their discussions on the debt crisis in the euro zone and as Spanish bond yields eased below 7%.
The Dow Jones Industrial Average gained 95.51 points or 0.75%. The S&P 500 index jumped 13.20 points, or 0.98%, while the NASDAQ rallied 34.43 points, or 1.19%.
The market started in positive ground amid a mixed performance in overseas markets, as hopes that the Fed will spring into action by probably extending operation twist increased risk appetite. Participants hoped that the central bank would provide further stimulus to the struggling U.S. economy, while the pressure on Spanish yields eased following a mildly successful short-term debt auction and as G20 leaders meeting in Mexico focused on the European debt crisis.
In economic news, the Commerce Department said housing starts fell 4.8% to a seasonally adjusted annual rate of 708,000. The April number was revised higher to a seasonally adjusted annual rate of 744,000. New construction rose 28.5% last month from May 2011.
The stimulus hopes came after the string of disappointing data in the U.S. economy, which points to sluggish growth and as the Fed started it two-day meeting today. The strength was broad based and the positive tone remained throughout the session, however, stocks closed off their highs of the session after reports from a German official saying that there are no plans to use EU’s bailout funds to buy troubled debt of the euro zone periphery.
Most sectors closed higher, with economic sensitive sectors like materials, financials, energy, and industrials logged the biggest gains, while defensive sectors like staples and utilities fell. In the materials sector, United States Steel (NYSE: X) surged to the top of the S&P 500, as shares rallied 9.5% to $20.15 amid talk of further stimulus in the world’s largest economy.
Also in the sector, CF Industries (NYSE: CF) rallied more than 5% to $180.86 after Topeka Capital initiated coverage on the stock with a Buy rating.
Financials received an edged in the session, as big money banks rallied amid encouraging building permits data and after the Federal Housing Finance Agency said it plans to help banks avoid being forced to buy back mortgages amid concern lenders are tightening standards even for the most creditworthy buyers. Bank of America (NYSE: BAC) jumped to the top of the Dow Jones Industrial average, as the stock gained 4.51% to $8.11, breaking above its calculated resistance at $7.90 and closing above $8 per share. According to reports, BofA is having talks with Julius Baer Group to sell its international wealth management business for about $2 billion.
Rivals Wells Fargo (NYSE: WFC) gained 1.54% to $32.96, while JPMorgan (NYSE: JPM) jumped 2.2% to $35.38 as CEO Jamie Dimon testified once again in Capitol Hill, saying that he complied with disclosure rules warning investors about changes that contributed to the bank’s massive trading loss of at least $2 billion.
Discover Financial (NYSE: DFS) was able to post a gain along with the broader market even after the credit-card issuer reported earnings that fell more than 10%.
In the energy sector, crude oil prices settled above $84 per barrel, while natural gas slumped, giving up some of the big gains from the prior session. Exxon Mobil (NYSE: XOM) gained 1.7%, while Schlumberger (NYSE: SLB) added 0.92% on news that it won a service contract from Mexico’s Pemex, the country’s state-run oil company.
In the industrials sector, FedEx (NYSE: FDX) jumped 2.8% to $91.01 after the delivery Company reported earnings and provided an outlook for the quarter and fiscal 2013 that missed expectations. The stock initially printed in negative territory but bounced from the lows after participants digested the figures and the company also pledge significant cost reductions.
In the consumer discretionary sector, homebuilders extended their recent rally, as PulteGroup (NYSE: PHM) rallied 3%. Goodyear Tire (NYSE: GT) led the sector higher, as shares rallied more than 5%, while JC Penny (NYSE: JCP) plunged to the bottom of the S&P 500 on news that its President Michael Francis will be leaving the company immediately, with CEO Ron Johnson assuming the direct responsibility of the company’s marketing and merchandising functions.
Among tech, Oracle (NASDAQ: ORCL), the information management software provider, rallied 3% to $27.96 after the company beat earnings expectations on record quarterly results and announced a $10 billion share repurchase program.
Microsoft (NASDAQ: MSFT) gained 2.9% to $30.70, posting the second biggest gain in the blue chip index as the company unveiled its latest entry into the hardware segment, a new windows based tablet computer. Microsoft unveiled to models of its tablet, named Surfaced, in a bid to try to replicate Apple’s success and compete against the iPad juggernaut. NVIDIA (NASDAQ: NVDA) surged nearly 7% on news that the chipmaker will supply its Tegra processor for the consumer edition of the tablet, which will likely be more popular thanks to its lower price point. Meanwhile, Apple (NASDAQ: AAPL) gained 0.28% to $587.41, closing just below calculated resistance at $588.50.
Facebook (NASDAQ: FB) had another positive day, with shares closing near $32 per share after Susquehanna reiterated its Positive rating. In after hours, Facebook announced changes to improve its payment systems, launching an option of subscription payments for apps. The new overhaul to its payment systems is designed to drive more spending and will allow developers to price items in local currencies, or games virtual currencies, instead of using its credits.
Elsewhere in the earnings front, Walgreen (NYSE: WAG) tumbled 5.9% to $30.09, as participants punished the shares after the company missed revenues expectations and announced that it will spend $6.7 billion to buy a 45% stake on international pharmacy chain Alliance Boots.
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