Strong economic reports, encouraging corporate results and positive developments in Europe took the benchmarks back into the green yesterday, partially compensating for the market slump on Wednesday. While Greece was able to find a new prime minister, Italian bonds receded below the 7% rate.
The Dow Jones Industrial Average (DJIA) inched up by a percent or by 112 points to settle at 11,893.86. The Standard & Poor 500 (S&P 500) was up 0.9% and closed the day at 1,239.70. The tech-laden Nasdaq Composite Index edged up 0.1% to finish the day at 2,625.15. The fear-gauge CBOE Volatility Index (VIX) declined 9.3% to 32.81. This drop in the fear-gauge index came just a day after it sky-rocketed 31.6% to 36.26, recording its largest-daily percentage gain since mid-August. Till Tuesday, the VIX was down 8.7%, while now the VIX is up 9% for the week. Consolidated volumes on the New York Stock Exchange, the American Stock Exchange and Nasdaq, were 7.3 billion shares, lower than last year’s daily average of 8.47 billion. For every two stocks that moved up on the NYSE, one stock moved lower.
Out of the 30 Dow components, only American Express Company (NYSE:AXP) and Bank of America Corporation (NYSE:BAC) closed in the red zone, dropping 0.2% and 2.1%, respectively. Cisco Systems, Inc. (NASDAQ:CSCO) moved up by 5.7% and was the leading gainer among the Dow components, spurred by earnings results that surpassed the Street’s expectations. It was the tech bellwether’s second straight quarterly performance and its results also helped the broader rally.
Meanhwhile, Viacom, Inc. (VIA-B) soared 8.2% and was one of the leading gainers among the S&P 500, following fourth quarter results that toppled estimates on both counters. Additionally, the company also upped its stock repurchase program. Also, news of the drugmaker Merck & Co. Inc. (NYSE:MRK) increasing its quarterly dividend by 11% boosted the company’s share prices by 3.5%. However, Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) slumped 39% after higher year-over year profits in the fourth quarter of 2011 came in short of the Street’s expectations.
Jobs data is always crucial news for the economy and when the government has good news to share on that front, investor sentiment in most cases just cannot turn negative. Through this year jobs data have not been as promising as it was needed to be, but the Labor Department has now reported a fall in initial claims, for a few consecutive weeks, including this week. Yesterday’s report from the U.S. Department of Labor stated: “In the week ending November 5, the advance figure for seasonally adjusted initial claims was 390,000, a decrease of 10,000 from the previous week’s revised figure of 400,000”. The data added to the optimism among investors as it not only a fall but was better than economists’ expectations of 398, 000.
On the other side of the Atlantic, things looked positive yesterday as Greece named Lucas Papademos, the former vice president of the European Central Bank (ECB), as its new prime minister. Over the last weekend, George Papandreou, the then prime minister of Greece, and the leader of the opposition were in agreement over the formation of the interim government as the former decided to vacate office to make way for new leadership. This development may also bring to a close the political crisis that had endangered a resolution to the debt crisis.
Separately, investors also heaved a sigh of relief noticing a better-than-anticipated auction of Italian government bills as the 10-year bond yields receded below the 7% level, which was considered to be an unsustainable figure. Markets were dealt a heavy blow on Wednesday as incremental fears and anxiety over Italy’s future unnerved investors. What rattled the investors in addition was the more than 7% spike in Italy’s 10-year bond yield, which was the highest jump since the euro was launched in 1999. Meanwhile, Mario Monti, the former European Commissioner, seems to be the chosen one to replace embattled leader Silvio Berlusconi, who said he will step down from his prime ministerial role after the nation’s austerity plans are passed next week.
