Stock Market News for March 21, 2011 - Market News

The markets, on Friday, edged modestly higher taking a cue from banks getting a go-ahead for raising dividend rates and a weakening Japanese yen. Also, the Libyan government’s decision for a cease-fire helped calm investors down for the moment. However, investor expectations of volatile trading in the weeks ahead, due to unrest in Middle East and the crisis in Japan prevailed and the fear-gauge VIX was up 23% for the week.

On the New York Stock Exchange advancers beat the decliners by a ratio of 3:1. The CBOE Volatility Index fell 6.4% on Friday, but was up 23% for the week. The Dow Jones Industrial Average (DJIA) moved up 0.71% to close at 11,858.52. The Standard & Poor 500 gathered 0.43% and the Nasdaq gained 0.29% to end at 1,279.21 and 2,643.67, respectively. However, losses earlier in the week prevented benchmarks from posting weekly gains and the Dow shed 1.5%, the S&P 500 moved down 1.9% and Nasdaq, in its fourth consecutive week of losses, was down 2.6%. Nasdaq is also in negative territory for the year and on a year-to-date basis, the index is down 0.3%.

The big news on Friday that helped markets reduce weekly losses was the Federal Reserve giving a go-ahead to large banks to resume paying or increase their dividends. The Fed announced this decision after conducting “stress tests” on the capital levels of 19 big banks. The test required financial institutions to test their revenues and capital against three various extreme recession environments. The decision came following a gap of more than two years after raising dividends and share buybacks were put on hold in February 2009.

Shortly after the announcement of the requirements, banks like JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), U.S. Bancorp (NYSE:USB) and BB & T Corp. (NYSE:BBT) raised their dividends. JPMorgan said it would increase its quarterly dividend to 25 cents per share and buyback roughly $15 billion in shares. Wells Fargo approved a special first-quarter cash dividend of 7 cents per share and the management increased the share-repurchase plan by an additional 200 million shares. The managerial board of USB authorized a 50 million common shares repurchase program and also increased the quarterly dividend. BB & T Corp upped its quarterly dividend to 16 cents per share and approved a special dividend of a penny in the second quarter of this year.

Among other banks, The Goldman Sachs Group, Inc. (NYSE:GS) will buy back preferred stock worth $5.65 billion that it had sold to Berkshire Hathaway in 2008. Citigroup, Inc. (NYSE:C) will continue its plan to return capital to shareholders. American Express Company (NYSE:AXP) and PNC Financial Services Group Inc. (NYSE:PNC) also disclosed plans to raise dividends.

The financial sector gained significant momentum from the event and was one of the driving factors behind the markets’ upward swing. All such shares moved higher as JPMorgan, Wells Fargo, USB, BB & T Corp, Goldman Sachs, Citigroup, American Express and PNC Financial gained 2.7%, 1.5%, 1.1%, 0.5%, 2.7%, 1.1%, 1.7% and 1.2%, respectively.

The markets also gained as the yen weakened, after rising to historical highs following the earthquake and tsunami which struck Japan. The world’s seven largest industrialized nations, commonly known as the G-7 declared plans to sell Japanese yen. The G-7, which comprises of United States, Japan, Germany, Britain, France, Italy and Canada, said: “In response to recent movements in the exchange rate of the yen associated with the tragic events in Japan, and at the request of the Japanese authorities, the authorities of the U.S., the U.K., Canada and the European Central Bank will join with Japan, on March 18, in concerted intervention in exchange markets”. A strengthening Yen weighed further pressure on the already weakening Japanese economy as exports become more expensive abroad. Japan is heavily dependent on exports and as the yen weakens it will help nation’s exporters and boost the economic recovery. Subsequently, the Nikkei gained 2.7%. The greenback gathered strength against the yen and the Fed announced the purchase of dollars against yen. The dollar gained 2.3% against the yen, marking the biggest one-day gain since September 2010. G-7 had intervened for the last time in September 2000 to halt the declining euro.

Crude-oil futures for April delivery was down by 35 cents and settled at little over $101. Higher crude prices, an outcome of the unrest in the Persian Gulf nations, had crippled the markets on many occasions and also ignited global economic fears. Libyan Foreign Minister Moussa Koussa complied with the United Nations resolution and announced a cease-fire. The announcement provided a breather to investors, who have been rattled by Libyan unrest for over a month now. Late on Thursday, the United Nations authorized military action against Libyan leader Muammar Gaddafi’s security forces to protect civilians in the rebel ravaged land. US President Barack Obama said the nation will not deploy ground troops in Libya, but warned that the US would not sit idle if attacks against the rebels continued.

On the domestic front, a report from the Food and Drug Administration (FDA) said removing menthol cigarettes from US markets would the overall health of the nation but did not ban menthol cigarettes. Shares of Lorillard, Inc. (NYSE:LO) spiked 10.6% as menthol cigarettes contribute 90% of its total revenue. Also among the gainers from this news were Reynolds American Inc. (NYSE:RAI) and Altria Group Inc. (NYSE:MO).

The technology sector also shared a good day and stocks like Cisco Systems, Inc. (NASDAQ:CSCO), Research In Motion Limited (NASDAQ:RIMM), Motorola Mobility Holdings, Inc (NYSE:MMI), Intuit Inc. (NASDAQ:INTU), NetApp, Inc. (NASDAQ:NTAP) and Dell Inc. traded higher by 0.8%, 0.1%, 5.0%, 3.1%, 3.7% and 2.8%, respectively.

Stock Market News for March 21, 2011 – Market News

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