Broadgate: Market News 25/3
25 March 2013
Stocks rose on Friday on optimism that a deal to bail out Cyprus would be reached, but ended lower for the week for just the second time this year.
Nike shares jumped 11.1 percent to $59.53 and hit a record intraday high at $60.23, a day after the athletic shoe maker reported stronger-than-expected results. The news lifted consumer discretionary stocks, with the S&P 500 consumer discretionary sector index ending up 1.2 percent, leading the S&P 500 higher.
Cyprus was close to a deal to raise billions of euros and unlock a bailout from the European Union that could avert a financial meltdown and its exit from the euro, its ruling party said.
The lingering concern among investors is that were Cyprus to leave the euro zone, it would open the door for other larger countries to follow suit and debilitate the bloc.
“If, in fact, the talk of departures from the euro were to get front and center, that could scare investors at the macro level, but it’s unlikely the Cyprus thing turns into that,” said Sandy Lincoln, chief market strategist at BMO Asset Management US in Chicago.
The S&P 500 ended the week down 0.2 percent, which was just its second weekly decline of the year, as investors were alarmed that Europe’s debt crisis would again roil markets over Cyprus’ financial troubles.
Stocks have been gaining on news of a strengthening recovery and the view the Federal Reserve will continue to support theeconomy. The S&P 500 is up 9.2 percent for the year.
The Dow Jones industrial average rose 90.54 points, or 0.63 percent, to end at 14,512.03. The Standard & Poor’s 500 Indexgained 11.09 points, or 0.72 percent, to finish at 1,556.89. The Nasdaq Composite Index advanced 22.40 points, or 0.70 percent, to close at 3,245.00.
For the week, the Dow dipped just 0.01 percent, while the Nasdaq slipped 0.1 percent.
Finance ministers from the 17-nation euro zone are due to hold talks Sunday about a revised bailout of Cyprus, two euro- zone sources told Reuters.
“Whether you’re talking about the euro zone or Washington, D.C., the market has been conditioned to these crises being resolved in the 11th hour or kicked down the road,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
The day’s other big gainers included shares of Tiffany & Co, which reported a slightly higher profit for the quarter that included the holiday season, and said the pace of its worldwide sales growth would pick up this year. Tiffany’s stock rose 1.9 percent to $69.23.
Shares of food makers Mondelez International and PepsiCo rose on Friday after a UK newspaper reported that activist shareholder Nelson Peltz has been building stakes in both companies.
Mondelez rose 4.1 percent to $29.73. PepsiCo gained 3.3 percent to $78.64.
Other upbeat corporate news came from Micron Technology. It posted a quarterly net loss on Thursday, but the chipmaker said the outlook for memory chip prices is improving. The stock gained 10.7 percent to end at $10.04 after hitting an intraday high of $10.27 – its highest in almost two years.
Volume was roughly 5.4 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 about 19 to 11 and on the Nasdaq, by about 3 to 2.
The euro rose on Monday after Cyprus clinched a deal with international lenders for a 10 billion euro bailout aimed at saving the country from financial meltdown.
The single currency rose 0.4 percent to $1.3040, pulling away from a four-month low of $1.28435 set last Tuesday. Against the yen, the euro climbed 0.7 percent to 123.60 yen .
The deal for Cyprus, which was swiftly endorsed by euro zone finance ministers, includes plans to shut down the country’s second largest bank in return for a 10 billion euro ($13 billion) bailout.
The plan involves winding down Popular Bank of Cyprus, also known as Laiki, and shifting deposits below 100,000 euros to the Bank of Cyprus to create a “good bank”.
Deposits above 100,000 euros in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki’s debts and recapitalise the Bank of Cyprus.
The agreement came hours before a deadline to avert a collapse of the banking system in Cyprus. Until a deal was reached, there had been concerns that Cyprus might have been forced to exit the euro zone.
Analysts said the euro might rise to around $1.3100 to $1.3150 in the near term as investors pare back bearish bets versus the single currency.
However, they were sceptical that there would be a sustained rally in the euro, given concerns about the euro zone’s economic outlook.
“People are focusing on European growth and the structural problems that are going to impede European growth,” said Sim Moh Siong, FX strategist for Bank of Singapore.
“We’re starting to see a greater contrast between U.S. growth and European growth. That contrast, I think, will continue to weigh on the medium-term outlook for the euro,” he said, adding that the euro could face short-term resistance at levels around $1.3140.
Technical charts show several resistance levels for the euro in the $1.3130 to $1.3140 area including its 100-day moving average at about $1.3132 and the euro’s March 8 intraday high of $1.3135.
“I have regarded the problems facing Cyprus as being only a short-term trading factor for the market,” said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo.
“I am sticking to the view that the euro will eventually be dragged down due to its economic fundamentals,” Karakama said.
The yen, which tends to rise in times of market stress, retreated broadly as the worries over Cyprus eased, with the dollar strengthening 0.4 percent to 94.82 yen.
Market expectations for the Bank of Japan to unveil aggressive monetary stimulus at its next scheduled policy meeting on April 3-4, the first under new BOJ Governor Haruhiko Kuroda, are seen likely to support the dollar against the yen in the near term.
Analysts say, however, that with expectations for drastic BOJ monetary easing already running high, the dollar could face a sell-on-fact type of reaction against the yen after next week’s meeting.
With the yen pressured by the prospects for BOJ easing, the dollar hit a 3-1/2 year high of 96.71 yen on March 12, marking a gain of roughly 22 percent for the greenback compared with mid-November.
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