Broadgate: Market News 15/3
15 March 2013
The Dow Jones industrial average extended its winning streak to 10 days on Thursday, a string of gains last seen in late 1996, and ended at another record high as investors were encouraged by data showing the labor market’s recovery was improving.
The S&P 500 took a late-day run at its record closing high of 1,565.15, but ended just 2 points away. The 30-stock Dow Jones industrial average has been setting record highs since last week, when it rallied on March 5 to initially surpass its previous lifetime closing peak set in October 2007.
U.S. equities have accelerated their run higher without a major consolidation since the start of the year, driven by improvement in the economy and the Federal Reserve’s continuation of its easy monetary policy.
“It’s simply a natural progression for prices to move to new highs in order for the market to advance. I don’t think it’s scaring investors,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.
“Fund flows really have reversed direction, and money started moving out of money markets and some from fixed income to equities. This kind of trend doesn’t change easily so we can expect a lot more to come in.”
The Dow Jones industrial average gained 83.86 points, or 0.58 percent, to 14,539.14, a record closing high. The Standard & Poor’s 500 Index rose 8.71 points, or 0.56 percent, to 1,563.23, about 2 points from its record closing high of 1,565.15, set on October 9, 2007.
The Nasdaq Composite Index advanced 13.81 points, or 0.43 percent, to end at 3,258.93.
Three months into the year, the Dow has shot up nearly 11 percent while the S&P 500 has gained 9.6 percent
Earlier Thursday, the Dow set another lifetime intraday high at 14,539.29.
Data on Thursday offered fresh signs of strength in the U.S. labor market as the number of filings for new unemployment benefits fell for the third week in a row.
The U.S. Producer Price Index rose in February by the most in five months as gasoline prices spiked, the Labor Department said in a separate report. There was, however, little sign of a broader increase in inflation pressures that could force the Fed to tighten monetary policy.
Boosted by the data, the housing sector index rose 1.5 percent and the Dow Jones Transportation Average added 0.8 percent.
Ten of the Dow’s 30 stocks hit at least 52-week highs, including Walt Disney Co. International Business Machines shares climbed to a lifetime intraday high of $215.85, and closed at $215.80, up 1.8 percent.
Energy shares led the Dow and the S&P 500 higher, with the S&P energy sector index gaining 1.3 percent. Chevron was among the Dow’s biggest percentage gainers, rising 1.4 percent to $120, after earlier hitting a fresh 52-week intraday high of $120.26.
After the bell, the Federal Reserve released scores for 18 U.S. bank holding companies that show how low their capital ratios would fall under proposed plans for dividends and stock buybacks if “severely adverse” economic conditions unfolded over the next two years.
JPMorgan Chase & Co shares fell 2 percent in extended-hours trading while Goldman Sachs Group Inc fell 1.9 percent.
During the regular session, Apple Inc shares rose 1 percent to $432.50. Its rival Samsung Electronics Co launched the latest Galaxy phone in New York on Thursday.
Shares of eBay, operator of one of the largest online marketplaces, climbed 1.6 percent to $51.80 after Evercore Partners raised its rating to “overweight.”
But on the downside, shares of Amazon, the world’s biggest Internet retailer, fell 3.4 percent to $265.74 after JPMorgan cut its rating on the stock to “neutral” from “overweight” and lowered its price target to $300 from $333.
E*Trade shares lost 8.2 percent to $10.85 after Citadel LLC, its largest investor, said it is selling its entire stake in the discount brokerage and bank company.
Volume was below average, with roughly 6 billion shares trading on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.
Advancers outnumbered decliners on both the New York Stock Exchange and the Nasdaq by a ratio of about 2 to 1.
The rally in the dollar paused on Friday as sterling enjoyed a short squeeze and the yen was propped up by profit-taking in the U.S. currency after Japan’s parliament approved new leadership at the Bank of Japan, as expected.
The dollar index eased slightly to 82.533, further retreating from a seven-month peak of 83.166 hit the previous day, though it is up nearly 5 percent from its February 1 trough of 78.918.
Japan’s parliament approved Prime Minister Shinzo Abe’s nominee for central bank governor, Haruhiko Kuroda, and nominees for the two deputy governor posts, clearing the way for radical monetary easing Abe has long pressed for.
But the yen did not budge much for now as hopes for fresh easing were offset by short-covering in the Japanese currency from one way bets against the yen in the past few months.
The dollar fetched 96.03 yen, almost flat from late U.S. levels. The currency pair has been trapped in a narrow trading range since it scaled a 3-1/2-year peak of 96.71 on Tuesday, as many investors looked to the BOJ’s next steps.
“What the BOJ will do should set the dollar/yen’s future trading range for a long time. The range could be 86-96 yen (if the BOJ disappoints), in which case, we are now near the top of the range. Or it could be 95-105 yen,” said Takako Masai, head of forex at Shinsei Bank in Tokyo.
Kuroda’s pledge to “act with speed” and do whatever it takes to hit the BOJ’s new inflation target has some investors speculating he may summon a meeting even before the next scheduled policy review on April 3-4. They will take over the current leadership on March 20.
Analysts suspected the greenback could continue to gain ground, particularly against the yen, sterling and euro as the U.S. economy outperforms.
Data showing a fall in the number of Americans filing new claims for employment benefits was the latest in a string of data painting a brighter outlook for the world’s biggest economy.
If that continues, it is likely to fuel market speculation of when the Federal Reserve will start to slow its asset buying and give dollar bulls a reason to get really excited.
“The exit debate will heat up in the second half of the year,” said Sebastien Galy, a strategist at Societe Generale.
“The U.S. economic outperformance and the fears of a not-too-distant Fed exit imply that the dollar is no longer a funding currency of choice in the carry trade.”
The dollar’s rally was curbed, however, also as the British pound surged as investors scrambled to cover short positions made on expectations of more quantitative easing by the Bank of England.
Bank of England Governor Mervyn King said the bank was not seeking a further depreciation in sterling and that the currency was now properly valued.
Traders also said the pound could have been helped by sovereign buying and media reports about Qatar planning to invest billions of pounds into key infrastructure projects in Britain.
The move in sterling gathered momentum as buy-stops were tripped, driving the currency up more than 1 percent on Thursday, its biggest daily gains in over seven months.
The pound last traded at $1.5090, slightly above late U.S. levels and well off a 33-month trough of $1.4832 set earlier in the week.
The euro bounced to $1.3010, also slightly up from late New York trade and well above a three-month trough of $1.2911 set on Thursday, partly cheered by solid demand for Spanish long-term bonds at an auction.
Still in addition to concerns over the sluggish euro zone economy, political instability in Italy could hamper the currency as the new Italian parliament convenes on Friday for the first time after inconclusive elections late last month.
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