Stocks Jumped for the Week on QE 3

Published on Friday, 14 September 2012 17:48 Written by Christopher Lynn

New York, September 14^th (TradersHuddle.com) – Stocks gained to new multiyear highs, with the Dow logging its fourth straight winning session and all of the major benchmark indices jumping for the week. Participants around the world cheered the Fed’s decision to unleash a new open-ended easing effort aimed to boost both jobs and economic growth. 

The Dow Jones Industrial Average gained 53.51 points, or 0.40%. The S&P 500 index climbed 5.78 points or 0.40%, while the NASDAQ jumped 28.12 points, or 0.89%.

For the week, the Dow rallied 2.15%, while the S&P 500 jumped 1.94% and the NASDAQ gained 1.52%.

The market started gains, adding to yesterday strong rally in response to Fed action. The Dollar continued to weaken and risk appetite was well supported, with commodities and equities around the world seeing increased bids, as participants reacted to the Fed stimulus. Economic data that was inline to better than expected had little impact on futures, as all of the focus was about the Fed.

Data showed that the retail sales in August climbed for the second straight month thanks to auto sales and higher gasoline prices, while the consumer price index (CPI) logged its biggest gain in 3 years. Industrial Production fell in August, posting its biggest decline since March 2009. Additionally, consumer sentiment jumped to its highest level in four months according to a preliminary reading from the University of Michigan.

Stocks remained firmly in positive ground, as participants ignored other bad news or the possibility of increased inflation or the possibility that the round of quantitative easing could fail to provide the necessary boost to the U.S. economy amid the slowdown in the global economy. The market briefly cut its gains after ratings agency firm Egan-Jones downgraded the United States credit rating to AA-minus from AA, citing its opinion that QE 3 would hurt the U.S. economy and the country's credit quality.

Most S&P 500 sectors gained, with energy, materials, and financials leading the charge higher, while consumer staples, healthcare, and utilities fell. The energy sector was the best performer as crude oil prices jumped above $100 per barrel for the first time since May, amid tensions in the Middle East and a weakening Dollar following the Fed’s announcement of further easing.

Coal stocks continued on fire, with Alpha Natural Resources (NYSE: ANR) jumping 3.9% to $8.55. The stock surged 23% in the week, adding to an impressive move of more than 50% so far this month. Along the coal trade, the refiners trade has also been an outperformer. In today’s session, Valero Energy (NYSE: VLO) gained nearly 3%, jumping 5.7% this week. The top performer in the sector was Marathon Oil (NYSE: MRO) rallying 4.15% to $31.09.

In the Dow Jones Industrial Average, Caterpillar (NYSE: CAT) was the top component, with shares jumping 2.7% amid bullish sentiment regarding increased demand from the Fed stimulus and the Chinese infrastructure projects announced earlier in the week. United Technologies (NYSE: UTX) was the second best performer in the index, with shares gaining 2.4%

The blue chip index will have some changes at the end of trading September 21^st. Dow Jones will include United Health (NYSE: UNH) as a new component, replacing Kraft Foods (NASDAQ: KFT), as the food maker would split its snacks business into a separate public company. Shares of United Health gained 0.67%, while shares of Kraft fell 0.5%.

Financials were once again supporting the rally, as its expected for the yield curve to steepen given the Fed’s actions. Bank of America (NYSE: BAC) gained 1.6% to $9.55, trading at its best levels since April. BofA jumped 8% this week.

In tech land, the focused continued over the positive reviews for Apple’s new iPhone 5 and reports that the pre-order batch for the device sold out in the first hour it was available at the Apple website for pre-order. Apple is launching the device on September 21^st, but now the pre-order shipping date from Apple shows a week later than the scheduled release. The reports of strong demand for the iPhone 5 has spurred analysts to revised their iPhone sales projections, including the third quarter and in the other hand have supported Apple to logged a new all-time high of $696.98, just shy of the $700 level. Apple (NASDAQ: AAPL) climbed 1.22% to $691.28, ending the week with a gain of 1.6%. The stock has surged 70.7% year to date.

Not all was rosy with the increased iPhone 5 sales projections. Wireless carriers were actually lower in the session. AT&T (NYSE: T) lost 2.33%, while Verizon (NYSE: VZ) fell 2.3%, both stocks posting the biggest declines in the blue chip index. Stifel Nicolaus downgraded both stocks to a Hold from Buy, citing recent gains and that increased sales for the iPhone 5 could result in short-term margin pressure due to the subsidies they incur on each device.

Elsewhere, Facebook (NASDAQ: FB) rallied another 6.2% to $22, capping its best weekly performance since its IPO. The stock jumped more than 15% this week after CEO Mark Zuckerberg gave bullish comments at the Tech Crunch conference regarding the company’s mobile prospects, adding that it’s a good time for employees to double down on the stock. The Financial Times reported that Facebook was set to roll out its real-time ad-bidding platform.