Stock Market News for March 9, 2011 - Market News

Indices moved out of negative territory on Tuesday, as Bank of America provided assurances of higher profits and an increase in dividends for shareholders. Additionally, crude prices hit a roadblock and eased off by 0.4% as OPEC members consider ramping up production for the first time in two years.

The Dow Jones Industrial Average (DJIA) inched up 1% to close at 12214.38 recovering losses made on the previous two trading days. The Standard & Poor 500 closed at 1321.82 after gaining 0.9%. According to Tobias Levkovich, Citigroup’s chief equities strategist, the S&P 500 has gained 94% over the last two years,the best bear market jump since the index closed at 676 on March 9, 2009. Nasdaq moved up 0.7% to finish at 2765.77. The fear gauge CBOE Volatility Index fell below 20 and advancers beat the decliners on the New York Stock Exchange by 3:1. The consolidated volumes on NYSE were 4.3 billion shares.

With the prospects of business stabilizing, Bank of America Corporation (NYSE:BAC) could increase earnings and provide higher returns to shareholders through higher dividends, a share buyback or special cash dividends. Comments from chief executive Brian Moynihan boosted investor sentiment and financials leapt 2%, eventually helping markets end higher. Moynihan said: “We can generate significant excess capital and return it to shareholders”. Speaking at the bank’s first investor-day conference since 2007, he announced that the bank has the ability to increase profits up to $40 billion per year pretax. Moynihan also noted that the bank has no acquisition plans and will cut costs and concentrate on customers. This move may also lead to other banks raising dividends, which they had reduced drastically during the slowdown in 2008 as a cost control measure. Bank of America gained 4.7% and closed at $14.69.

Following Bank of America’s optimistic announcement, financial shares in the S&P 500 jumped 2.2% and led the index’s 10 company groups. Gainers for the financial sector included JPMorgan Chase & Co. (NYSE:JPM), American Express Company (NYSE:AXP), PNC Financial Services Group Inc. (NYSE:PNC), Citigroup, Inc. (NYSE:C), Wells Fargo & Company (NYSE:WFC) and The Goldman Sachs Group, Inc. (NYSE:GS) as they gained 2.7%, 3.5%, 4.4%, 2.7%, 2.5% and 1.4%, respectively.

Markets gained some respite after a 0.4% decline in crude prices as West Texas Intermediate crude for April delivery settled at little over $105 per barrel. However, prices are still on the higher side and the fall was little consolation after a 9% increase in price in the first week of March alone. This decline came in after Kuwait Oil Minister Sheikh Ahmad al-Abdullah Al-Sabah announced the possibility of OPEC boosting oil production. Speaking at a press conference he said: “We are in consultations about a potential output increase but have not yet decided.” The report also boosted US indices, bucking the trend of surging crude prices taking markets lower.

However, concerns are not confined to Libyan unrest and the Middle Eastern situation can take a turn for the worse given the chances of Saudi Arabia’s royal family facing the prospects of protests along similar lines. Helima Croft, analyst at Barclays said Saudi Arabia may not remain unaffected given the situation in the region. Saudi Arabia’s oil minister Ali Naimi had earlier provided assurances that the nation’s oil production would be increased to meet shortages created by Libyan unrest. Under normal circumstances, Libya produces 1.6 million barrels per day and Naimi said Saudi Arabia has the potential to produce about 3.5 million barrels per day of spare capacity.

However, if Saudi Arabia faces similar protests; traders, investors and the global economy will be looking at crude prices of $200 per barrel. President of Strategic Energy & Economic Research Michael Lynch said the major concern is whether the Saudi Arabian and Iranian governments will be dramatically affected by such upheavals. Meanwhile, the Department of Energy’s Energy Information Administration said oil prices should average $105 per barrel in 2011 and there is a 25% chance of gasoline hitting the $4 mark during the summer. Gasoline pump prices in US have increased now for 21 days consecutively.

Energy stocks dipped lower and this group was the only one among the S&P index to fall. Shares of Chesapeake Energy Corporation (NYSE:CHK), Range Resources Corporation (NYSE:RRC), EOG Resources, Inc. (NYSE:EOG), Petroleo Brasileiro (NYSE:PBR) and Suncor Energy Inc. (NYSE:SU) slid 2.5%, 2.3%, 2.2%, 2.5% and 4.2%, respectively.

Among homebuilders shares, PulteGroup, Inc. (NYSE:PHM) gained 8.4% after it reported higher traffic and home orders for the first two months of this year. This stock was also the biggest gainer for the S&P 500 index. Other major gainers for the sector were KB Home (NYSE:KBH), DR Horton Inc. (NYSE:DHI). Lennar Corp. (NYSE:LEN) and Toll Brothers Inc. (NYSE:TOL).

Stock Market News for March 9, 2011 – Market News

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