Stock Market News for September 27, 2011 - Market News

Hopes of a likely resolution to the lingering European debt crunch steered the benchmarks into positive territory with the Dow logging its best percentage gain in almost a month. Reports of a plan to leverage money from the European Financial Stability Facility paved the way for the markets’ upswing bringing relief to investors after almost a week.

The Dow Jones Industrial Average (DJIA) returned to its winning ways, registering a triple-digit movement and soaring 2.5% to settle at 11,043.86. The Standard & Poor 500 (S&P 500) gained 2.3% to close the day at 1,162.95. The tech-heavy Nasdaq Composite Index moved up 1.4% and signed off at 2,516.69. Investor fears seemed to have reduced to a certain degree with the fear-gauge CBOE Volatility Index (VIX) dropping 5.4%. However, the VIX still traded more than 20% higher for the month. On the New York Stock Exchange, Amex and Nasdaq, consolidated volumes were at 8.75 billion shares, well above last year’s daily average of 8.47 billion. On the NYSE, for every 11 stocks that gained, 4 stocks were on the declining side.

The big news of the day was undoubtedly the possibility of coordinated action on a resolution to the European debt-crisis that has threatened the global economy and crippled the indices on several occasions. According to reports, European officials are working on a detailed plan that will shore up the stability of European banks. Additionally, over the weekend European ministers assured global finance leaders in Washington that they would take more aggressive decisions to fight the debt crisis. On Monday, US President Barack Obama asked Europe’s leadership to be more active and solve lingering issues that are threatening the global economy.

It is expected that a proposed “special purpose vehicle” will boost the flagging European economy. This vehicle plans to issue bonds to investors and utilize the proceeds to purchase sovereign debt of troubled European nations. The plan aims to allay the concerns of troubled nations and also European banks, as the “special purpose vehicle” would seek a loan from the European Central Bank using the issued bonds. Banks reeling under the pressure of debt would be then able to sell the debt to the vehicle. In simpler terms, through this plan, banks will exchange sovereign debt for European Investment Bank issued bonds. The European Investment bank is owned by the member states of the European Union.

Investors also pinned their hopes on a quick resolution to the Greek debt crisis and Europe’s financial turmoil as euro-zone members continue to back an expansion of the European Financial Stability Facility (EFSF). This is a bailout fund that aims at boosting troubled nations like Greece, Ireland, Portugal, Spain and also Italy.

The financial sector gained the most form these developments and the Financial Select Sector SPDR (XLF) jumped 4.5%. Among the bellwethers to gain were JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), Citigroup, Inc. (NYSE:C), The Goldman Sachs Group, Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) and they were up 7.0%, 4.6%, 7.0%, 4.2% and 6.5%, respectively.

However, the tech sector was a laggard in the broader rally and traded in the negative zone until finally settling modestly higher. According to a report from JPMorgan, Apple Inc. (NASDAQ:AAPL) is cutting its orders from suppliers of parts for iPad tablet. This development remained an overhang on the stock and it was down 0.3%. Nonetheless other tech bellwethers like International Business Machines Corp. (NYSE:IBM), Hewlett-Packard Company (NYSE:HPQ), Microsoft Corporation (NASDAQ:MSFT) and Cisco Systems, Inc. (NASDAQ:CSCO) gained 3.1%, 1.85, 1.5%, 2.4%, respectively.

Meanwhile, the report on the new home sales provided no encouragement as the reading fell for the fourth-straight month. According to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development: “Sales of new single-family houses in August 2011 were at a seasonally adjusted annual rate of 295,000,” which was “2.3 percent (±13.9%)* below the revised July rate of 302,000, but is 6.1 percent (±18.8%)* above the August 2010 estimate of 278,000”.

Stock Market News for September 27, 2011 – Market News

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