Italian Prime Minister Silvio Berlusconi decided to step down from office, a development which lifted investor sentiment enabling the markets to post their second consecutive days of gains. The Dow posted a three-digit uptrend while none of the 10 industry groups in the S&P 500 closed in the red.
The Dow Jones Industrial Average (DJIA) jumped 101 points or 0.8% to finish the day at 12,170.18. The Standard & Poor 500 (S&P 500) climbed 1.2% and closed at 1,275.92. The tech-laden Nasdaq Composite Index gained 1.2% and ended trading for the day at 2,727.49. The fear-gauge CBOE Volatility Index (VIX) dipped 7.9% yesterday and is now below 28, reflecting subdued fears in the markets. The fear-gauge index is down 8.7% till now this week, and has moved below the key-level of 30. A trend of low volumes continued as consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were 7.13 billion shares, lower than last year’s daily average of 8.47 billion. On the NYSE, for a single stock that declined, around three stocks moved up.
Initially, the domestic markets declined as Berlusconi narrowly won a legislative vote and investors thought he would continue in office. Nonetheless, he failed to garner an absolute majority in the Chamber of Deputies, and as news spread that Berlusconi would vacate office, domestic markets rallied.
Following Berlusconi’s loss in the parliamentary vote, the embattled premier met Italian President Giorgio Napolitano, and his office stated that Berlusconi had “understood the implications of the vote”. It was further confirmed that Berlusconi has agreed to leave office after the nation’s austerity plans are passed next week. This would mark an end to Berlusconi’s two-decade long political career that may end on a sour note with Italy feared to be the latest victim of the European debt woes. The nation will now look for a new leader, who is expected to take aggressive measures to tackle the debt crisis.
Separately, Greece is due to have a new interim prime minister, after George Papandreou decided to leave his prime minister’s seat in agreement with the leader of the opposition. It is perceived that this development might end the political crisis that had threatened to endanger a resolution to the debt crisis. While the interim government will prioritize passing the European rescue package, Eurozone leaders urged coalition members to co-sign the vow of keeping alive economic reforms in exchange for which the nation would receive emergency funds. However, the nation needs to have a new interim prime minister to ensure the receipt the next installment of the emergency fund.
As mentioned earlier, none of the 10 industry groups in the S&P had to close in the red, with financials and technology among the leading gainers. Coming to financial stocks, bellwethers including Apple Inc. (NASDAQ:AAPL), Google Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), Intel Corporation (NASDAQ:INTC), International Business Machines Corp. (NYSE:IBM) and Oracle Corporation (NASDAQ:ORCL) gained 1.6%, 0.7%, 1.3%, 1.9%, 0.4% and 2.3%, respectively.
On the financial front, the SPDR S&P Bank ETF (KBE) index and Financial Select Sector SPDR (XLF) fund jumped 2.4% and 1.9%, respectively. Stocks like Bank of America Corporation (NYSE:BAC), Citigroup, Inc. (NYSE:C), Wells Fargo & Company (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) jumped 1.3%, 2.3%, 4.4% and 2.3%, respectively.
