The markets registered their third straight week of gains as the indices closed with multi-year highs on Friday. China’s measures to curb inflation and continuing tension in the Middle East failed to cause any damage to the markets as energy stocks led the indices higher.
On Friday, markets closed after a third straight week of gains. The Dow ended the week 1% higher at 12,391.25, its highest close since June 5, 2008. The index was up 0.6% for the day. The S&P 500 added 0.19% and closed at 1,343.01, its highest closing since June 17, 2008. For the week the index was up 1%. The Nasdaq recorded a marginal rise of 0.08% and ended the day at 2833.95, which is its highest point since October 31, 2007. On a weekly basis, the Nasdaq was up 0.9%. The CBOE Volatility Index (VIX) was up 4.7% for the week and closed at 16.43. Despite the rise, the Volatility Index was at historically low levels. On the New York Stock Exchange, advancing stocks outnumbered the declining ones in a ratio higher than 4:3 but volumes remained on the lighter side.
The People’s Bank of China increased the reserve-requirement ratio of banks by 50 basis points, the second time the country’s central bank took such a step this year. Experts opine that the move was not surprising to the US and expect China to continue the trend, but concerns about inflation remain. This measure was intended to take out the additional liquidity from the economy and curb inflation which rose to 4.9% in January this year.
Unrest in the Middle East failed to cast a negative spell on the indices but helped lift crude-oil futures beyond the $90 per barrel mark. Subsequently, energy stock rallied strongly taking the indices higher. Meanwhile, tensions in Bahrain continued to rise. According to media reports, protesters in Bahrain said the army opened fire on demonstrators. Anti-government protests ran into the fifth day even in the face of stiff opposition from military forces as four funerals were carried around the capital simultaneously. Leaders said the crackdown further fuelled their demand for an immediate change in the government. Meanwhile, Bahrain’s King, Hamad bin Isa Al Khalifa reportedly asked the Crown Prince Sheikh Salman bin Hamad Al Khalifa to speak to all parties and start a national dialogue to settle unrest in the nation. The prince appeared on television and publicly ordered the removal of armed security forces from the streets with immediate effect.
Federal Reserve Chairman Ben Bernanke defended the central bank’s easy money policy during the G-20 meeting in Paris which is being attended by a group of 20 finance ministers. Critics have alleged that the Federal Reserve’s quantitative easing policy caused speculative demand in commodities which in turn increased energy and food prices.
On a sectoral basis, energy stocks were the strongest gainers as oil prices rose sharply on political uncertainty in North Africa and the Middle East. Shares of Murphy Oil (NYSE:MUR) were up 1.67% to close at $73.88 and Chevron (NYSE:CVX) added 1.6% to end at $98.72. Materials stocks declined despite news that China had raised its reserve ratio requirement by 50 basis points to combat inflation. Stocks such as Freeport-McMoRan dropped 4.15% to $52.95 and Alcoa (NYSE:AA) fell 1.37% to $17.28.
Coming to some stocks that swayed on news of earnings and estimates, Intuit Inc. (NASDAQ:INTU) gained 7.28% after the company raised its quarterly earnings outlook. American Public Education (NASDAQ:APEI) gained 23.95% after the for-profit educator and owner of American Military University posted fourth-quarter profits that beat the Street’s estimates. Healthspring Inc. (NYSE:HS) rose 8.62% after the company forecast 2011 earnings that was ahead of analysts’ estimates. Aruba Network (NASDAQ:ARUN) reported second quarter profits that topped estimates and shares of the company gained 17.02%. Shares that declined included Rosetta Stone Inc. (NYSE:RST), a language-instruction software maker, which lost 17.32% after a weak fourth quarter forecast. Campbell Soup declined 3.89% after the company downsized its 2011 outlook. Online monitoring equipment maker Blue Coat Systems fell 7.47% after a weak fourth quarter outlook.
News on mergers and acquisitions were aplenty for the week, General Electric (NYSE:GE) agreed to acquire John Wood Group, a UK oil services company for an estimated $2.8 billion. For the week, GE was up 0.5%. French pharmaceutical company Sanofi-Aventis (NYSE:SNY) at last agreed to a deal worth $20.1 billion with Genzyme (NASDAQ:GENZ) in the largest acquisition bid in the pharmaceutical sector since 2009. Family Dollar Stores (NYSE:FDO) was up 19% for the week after the company received an offer from an investment group.
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