Strong earnings result from tech-bellwether Apple powered the Nasdaq to its best performance this year, while fellow benchmarks also enjoyed gains riding on the bullish sentiment. The markets’ rally was further spurred on by the Federal Reserve Chairman’s comments that the central bank "would not hesitate" to bolster the economy if needed.
The Dow Jones Industrial Average (DJI) gained 0.7% and settled at 13,090.72. The Standard & Poor 500 (S&P 500) jumped 1.4% to close yesterday’s trading session at 1,390.69. The Nasdaq Composite Index soared 2.3% to end substantially higher at 3,029.63. With investors receiving strength from positive corporate results and optimistic comments from the central bank, the fear-gauge CBOE Volatility Index (VIX) declined 7.1% to settle at 16.82. Consolidated volumes on the New York Stock Exchange, the Nasdaq, and the American Stock Exchange were 6.8 billion shares, marginally ahead of this year’s daily average of 6.77 billion. Advancers had a better run over the declining stocks on the NYSE; as for every stock that declined, more than three stocks ended higher.
The earnings season has enjoyed fair weather till now and a number of key companies have come out with positive figures. Thomson Reuters data suggest that three-fourths of the 200 S&P 500 companies, reporting so far, have surpassed the Street’s estimates. The latest addition to the list is tech-bellwether Apple Inc. (NASDAQ:AAPL). Earnings soared 92.2% year-on-year, while revenues jumped 59.0% year over year, beating the Street’s estimates by a wide margin. Apple moved $49.72 or 8.9% higher to close at $610.00 a share.
Further, according to data from Thomson Reuters, estimated earnings growth of companies in the S&P 500 shot up to 6.9% from 4.6% following Apple’s results. Apple also helped the Nasdaq chalk up strong gains and post its best daily results for the year. The company’s robust figures were primarily due to strong demand for the iPhone 4S and the new iPad.
Subsequently, the technology sector had a great run and the Technology Select Sector SPDR (XLK) jumped 2.8%. Stocks including International Business Machines Corporation (NYSE:IBM), Google Inc. (NASDAQ:GOOG), Intel Corporation (NASDAQ:INTC), Dell Inc. (NASDAQ:DELL), Hewlett-Packard Company (NYSE:HPQ) and EMC Corporation (NYSE:EMC) gained 1.8%, 1.4%, 2.0%, 1.5%, 1.6% and 2.4%, respectively.
The benchmarks’ rally was also spurred by comments from central bank chairman Ben Bernanke. Investors chose to focus on the positives and their positive mood was clearly reflected by the benchmarks. After a meeting with Federal Open Market Committee in Washington, Ben Bernanke commented: “We remain prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target”. Investors grew hopeful about the third-round of bond purchase plan and Bernanke fuelled the optimism as he said: "Those tools remain very much on the table and we will not hesitate to use them should the economy require that additional support".
Bernanke added that the economy is expanding modestly but there a few factors out to be concerned about. He stated the housing sector “remains depressed”. Speaking on the labor market he said: "Labour market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated”. The labor market is of utmost importance and the central bank will look at it closely to decide on policy measures. "If unemployment looks like it's no longer making progress, that will be an important consideration in thinking about policy options," the Fed chairman added.
While these positives dominated the mood, the U.S. Census Bureau reported new orders for manufactured durable goods to have dropped 4.2% to $202.6 billion in March, following a 1.9% increase in February. The decline is far wider than consensus estimates of a 1.5% decline.
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