Better-than expected economic reports on the domestic front and positive developments from the other side of the Atlantic helped to quell fears about a European debt crisis and markets ended sharply higher on Friday. For the week, indices settled in the green as Friday’s jump helped to reduce the losses benchmarks suffered owing to concerns from the Euro zone.
On the second-straight day of gains, the Dow Jones Industrial Average (DJIA) surged almost 260 points or 2.2% to close the day at 12,153.68. The Standard & Poor 500 (S&P 500) gained roughly 2.0% to close the day at 1,263.85. The Nasdaq Composite Index jumped 2.0% to finish the day at 2,678.75. The fear-gauge CBOE Volatility Index (VIX) receded to end near 30. Volumes remained low, probably owing to the Veteran’s Day holiday. On the New York Stock Exchange, for every six stocks that moved up, only one stock declined.
European concerns had taken away the sheen from markets this week; and positive developments in the cross-Atlantic region coupled with encouraging domestic economic reports helped to alleviate the situation to a certain extent. It was another volatile day for the benchmarks, but back-to-back gains helped the markets end in the green with the Dow and S&P 500 gaining 1.4% and 0.9%, respectively, for the week. However, the Nasdaq lost out on a seat in the green and dropped 0.3%.
A change of leadership in Greece was what investors had anxiously been waiting for and it was this very development that contributed to the rally. Ahead of the week starting November 7, 2011, George Papandreou, now the former prime minister of Greece and the leader of the opposition agreed on the formation of the interim government after the former decided to vacate office to make way for new leadership. Later this week on Thursday, the nation named Lucas Papademos, the former vice president of the European Central Bank (ECB), as its new prime minister.
The appointment of Papademos will expectedly settle the political turmoil that Greece had been afflicted by, and the new prime minister is also due to name a new crisis cabinet. This cabinet will be responsible for rolling out austerity measures and to help the nation deal its debt crunch. The new prime minister will be responsible for fulfilling the terms of the $177 billion bailout program.
Separately, Italy also calmed jittery investors after the country’s Senate passed austerity measures that were being demanded by the Euro-zone leaders. This move cleared the way for the lower house to approve the package and a new government is expected to be formed after Silvio Berlusconi resigns from the prime minister’s office. The approval from the lower house is expected over the weekend. It is almost certain now that Mario Monti, the former European Commissioner, will take be Italy’s new prime minister.
Investors cheered the developments in Europe and all the 30 Dow components moved into the positive zone. Gains were led by Walt Disney Co. (NYSE:DIS), which jumped almost 6.0%, following better-than-expected quarterly results. Among other gainers were Alcoa, Inc. (NYSE:AA), Boeing Co. (NYSE:BA), Caterpillar Inc. (NYSE:CAT), Hewlett-Packard Company (NYSE:HPQ), Intel Corporation (NASDAQ:INTC), Merck & Co. Inc. (NYSE:MRK) and United Technologies Corp. (NYSE:UTX) and they moved up 3.4%, 3.2%, 4.3%, 3.1%, 3.3%, 2.9% and 3.1%, respectively.
On the economic front, data from the Thomson Reuters and the University of Michigan study showed that consumer sentiment has jumped to its highest reading in five month in early November. The preliminary reading on consumer sentiment was 64.2, up from 60.9 last month. The data came in ahead of consensus expectations of a reading of 61.5.
