A day after the benchmarks suffered their largest declines for the year so far, encouraging jobs numbers helped the markets surge ahead on Wednesday. Moreover, reports that the Federal Reserve’s plans to buy bonds also guided the indices back to winning ways after three-days of consecutive losses. Banking stocks lifted the broader markets, negating cross-Atlantic concerns that had spooked investors on Tuesday.
The Dow Jones Industrial Average (DJI) gained 0.6% to settle at 12,837.33. The Standard & Poor 500 (S&P 500) leapt 0.7% and closed yesterday’s trading session at 1,352.63. The tech-laden Nasdaq Composite Index enjoyed decent gains of 0.9% and finished trading at 2,935.69. The fear-gauge CBOE Volatility Index (VIX) plunged 8.6% to settle at 19.07. Consolidated volumes on the New York Stock Exchange, NYSE Amex and Nasdaq were 6 billion shares, lower than the daily average of 6.9 billion shares. The advancers enjoyed a clear advantage over the decliners, as for every four stocks that gained, only one stock moved down.
On Wednesday, markets recovered partially from the drudgery they have been subjected to since the first day of this week. Benchmarks erased most of the losses for the week, and currently the Dow, S&P 500 and Nasdaq are down 1.1%, 1.2% and 1.4%, respectively. Better jobs numbers had a large role to play in this context. The job market scenario has been improving for quite some time now as has been borne out by recent ADP numbers. According to the payroll processor, 216,000 new jobs were added by the private sector during the month of February. The ADP National Employment Report also said that the 14, 000 job added by the financial services sector was the largest such increase in two years. According to the report: “Employment in the private, service-providing sector rose 170,000 in February, and employment in the private, goods-producing sector increased 46,000 in February. Manufacturing employment increased 21,000”.
These ADP numbers eased jittery investors and they rushed to place their bets. Since late-December, economic data has mostly been upbeat. The jobs market has mostly impressed the investors and they now await crucial non-farm payroll data to be released by the government on Friday. A robust report will most likely send the benchmarks soaring and might help the markets chalk up another weekly gain.
Investors were also buoyed by reports that the US Federal Reserve was considering a new bond-purchase program. These speculations boosted sentiment, though no official from the Federal Reserve or the New York Federal Reserve Bank agreed to comment on the issue. According to The Wall Street Journal: “If growth or inflation pick up much, officials seem unlikely to launch a bond-buying programme because the economy might not need the extra help or because doing more could spur higher inflation”.
Meanwhile, peeking into the European region, fears and apprehensions over Greece’s debt situation seemed to have eased somewhat. There were signs that Greece and its private creditors will smoothen the way for the bond-swap deal, a pre-requisite for Greece to receive its much-needed bailout fund.
Financials and banking stocks in particular were among the top gainers for the day, just a day after they took a severe battering. The Financial SPDR Select Sector Fund (XLF) gained 1.3% and the KBW Bank Index (BKX) gained 1.9%. Among the winners, American Express Company (NYSE:AXP), Bank of America (NYSE:BAC), Citigroup, Inc. (NYSE:C), JP Morgan Chase & Co. (NYSE:JPM), The Goldman Sachs Group, Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) gained 1.0%, 4.0%, 3.5%, 1.6%, 2.4% and 3.2%, respectively.
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