Broadgate: Market News 21/3
21 March 2013
Stocks climbed on Wednesday, with the S&P 500 snapping a three-day losing streak as the Federal Reserve reassured investors that it would keep supporting the economy.
The housing sector’s stocks ranked among the best performers after Lennar Corp reported a first-quarter profit well above analysts’ expectations as lower interest rates and rising rents increased home sales.
The Dow hit an intraday record high but fell short of closing at another record. The view that the Fed will keep interest rates at record lows for years has helped drive the rally in stocks this year, along with signs of a strengthening U.S. recovery.
In its statement, the Fed said it would stick to its $85 billion monthly bond-buying stimulus, citing still high unemployment levels, but said it would take into account the possible risks of its policies.
The statement, and comments by Fed Chairman Ben Bernanke, came as the market grapples with banking woes in Cyprus, the most recent flare-up in the euro-zone debt crisis.
“It is amazing what a Fed on your side really brings for this market… It really can wipe out a lot of uncertainty and a lot of bad news,” said Burt White, managing director and chief investment officer of LPL Financial in Boston.
Cypriot leaders held crisis talks on Wednesday to avoid a financial meltdown a day after the country’s parliament rejected a tax on bank deposits, which had been proposed over the weekend by European Union officials.
Investors worry that a collapse of the banking system in Cyprus will tighten credit across Europe and become another hurdle in the region’s bumpy road out of economic crisis.
The Dow Jones industrial average gained 55.91 points, or 0.39 percent, to end at 14,511.73, after rising as high as 14,546.82, an intraday record.
The Standard & Poor’s 500 Index rose 10.37 points, or 0.67 percent, to finish at 1,558.71. The Nasdaq Composite Index climbed 25.09 points, or 0.78 percent, to close at 3,254.19.
The Dow is now up 10.7 percent for the year, while the S&P 500 is up 9.3 percent.
The CBOE Volatility Index or VIX, Wall Street’s favorite barometer of fear, fell 12 percent to end at 12.67 — its worst daily percentage drop in about three weeks — after rising sharply for the past two days.
After the bell, shares of Oracle fell 8.2 percent to $32.85 after the world’s No. 3 software maker reported revenue that missed expectations.
During Wednesday’s regular session, the advance by U.S. stocks followed a recovery in European shares.
“You might have thought the markets would do horribly after the Cyprus parliament vote, but I think that was a good step forward,” said Cam Albright, director of asset allocation for Wilmington Trust Investment Advisors in Wilmington, Delaware.
The stock of Lennar, the No. 3 U.S. homebuilder, jumped 4.8 percent to end at $43.40, its highest closing level since June 2007. The PHLX housing sector index shot up 2.8 percent to 197.17, its highest close since July 2007.
Shares of Adobe Systems Inc, the maker of Photoshop and Acrobat software, also jumped, a day after the company raised its full-year adjusted earnings forecast. The stock gained 4.2 percent to $42.46.
Among the day’s decliners, shares of FedEx Corp lost 6.9 percent to $99.13, its largest daily percentage drop since September 2011, after the package-delivery company cut its full-year forecast. FedEx reported a 31 percent drop in quarterly profit on Wednesday, citing restructuring costs and weakness in its air freight express business.
The Dow Jones Transportation Average slipped 0.4 percent, weighed down by FedEx, one of its components.
Volume was roughly 5.9 billion shares traded 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 outpaced decliners on the NYSE by a ratio of about 3 to 1, while on the Nasdaq, 17 stocks rose for every seven that fell.
The yen edged higher versus the dollar on Thursday but its gains were limited as the market waited for clues on how aggressively the Bank of Japan will ease monetary policy under its new leadership.
New BOJ Governor Haruhiko Kuroda and new Deputy Governors Kikuo Iwata and Hiroshi Nakaso are scheduled to hold a news conference from 0900 GMT(05:00 a.m. EST) on Thursday.
“I’m skeptical that anything new can come of it,” said Rob Ryan, strategist for RBS in Singapore.
“He (Kuroda) is part of a board, and it’s going to be a little difficult for him to go up there before the board has met, and promise to do anything,” Ryan said.
Still, one possibility for Kuroda might be to call an early policy board meeting ahead of the BOJ’s next scheduled policy meeting on April 3-4, Ryan added.
“That would be another powerful signal, to say we’re doing something and we’re going to get started on it straight away,” he said.
The dollar slipped 0.2 percent to 95.80 yen.
Market expectations for aggressive monetary easing by the BOJ have been running high, and that helped lift the dollar to a peak of 96.71 yen last week, the greenback’s strongest level versus the Japanese currency since August 2009.
Market players in Tokyo said repatriation flows from Japanese investors helped weigh on the dollar against the yen on Thursday.
The euro edged up 0.1 percent to $1.2947.
“The order board is skewed to the top side now… Stops higher and bids lower,” said a trader for a European bank in Singapore, referring to the euro.
The single currency has rebounded since hitting a four-month low of $1.28435 on Tuesday, as immediate fears about a financial meltdown in Cyprus eased, with the small island country pleading for aid from Russia.
Cyprus is still scrambling to secure a deal to avert financial chaos, having rejected terms of a bailout from the European Union. It extended a bank lockdown to next week to prevent a run on banks and has turned to Russia for a lifeline.
The U.S. Federal Reserve on Wednesday pressed forward with its aggressive policy stimulus, saying it will continue to buy $85 billion in mortgage and Treasury bonds per month.
Fed Chairman Ben Bernanke said central bank would only slow the pace of its bond buying after the labor market showed sustained improvement.
“There will be reasonable U.S. economic growth this year and the unemployment rate will drift lower. But neither will be sufficient to induce the Fed to take its foot off the gas. The open-ended QE program is set to run into early 2014 at the very least,” said Martin McMahon, economist at Commonwealth Bank.
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