Just a day after markets’ suffered their biggest fall of the year, a single positive earnings report reversed the benchmarks’ five-day losing streak on Wednesday. Markets’ uptrend yesterday was also boosted by a fall in Spain’s borrowing costs, a concern which had dealt serious injuries to the markets over the last few days.
The Dow Jones Industrial Average (DJI) gained 0.7% to close at 12,805.39. The Standard & Poor 500 (S&P 500) also jumped 0.7% and finished yesterday’s trading session at 1,368.71. The tech-laden Nasdaq Composite Index moved up 0.8% and settled at 3,016.46. The fear-gauge CBOE Volatility Index (VIX) also slipped from its path of a continuous uptrend, shedding a meager 1.8% to close at 20.02. Consolidated volumes on New York Stock Exchange, the American Stock Exchange and the Nasdaq remained low at 6.31 billion shares, falling behind last year's daily average of 7.84 billion. Advancing stocks on the NYSE stormed past the decliners; as for 78% stocks that gained, only 20% stocks traded lower. The remaining 2% stocks were left unchanged.
Yesterday’s bounce back was not enough to negate all of the week’s losses and the Dow, S&P 500 and Nasdaq are still down 2%, 2.1%, and 2.1%, respectively, for the week. Nonetheless, after investors were left distraught by the negative trend of the benchmarks over the past five trading days, any gains will help to buoy sentiment. The gains made yesterday not only helped limit the week’s losses and end the losing streak, but also lifted the Nasdaq back to its key level. Tuesday’s 1.8% loss in the tech-laden index had dragged it below 3, 000, but the gains made yesterday enabled it to remain 16 points ahead of the key level. However, investors will have to wait for more positive trends to see the blue-chip index and S&P 500 climb back to their respective key levels of 13, 000 and 1, 400.
It was Alcoa, Inc.’s (NYSE:AA) results that surprised the Street after it declared profits for the quarter. The largest U.S. aluminum producer reported earnings per share of $0.09, contrary to estimates of a loss of $0.04 per share. Alcoa also bounced back to profits after it reported a loss of $0.18 in the prior quarter. Alcoa, a bellwether in its domain, is the first among the Dow components to report results, and is bound to grab investors’ attention. This earnings report also unofficially kick-starts the earnings season, and will surely help the broader rally. Alcoa’s shares jumped 6.2% to lead the gains among the 30 Dow components, followed by the likes of Cisco Systems, Inc. (NASDAQ:CSCO), The Boeing Company (NYSE:BA), Intel Corporation (NASDAQ:INTC), AT&T, Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ), which jumped 2.4%, 1.7%, 1.5%, 1.1% and 1.6%, respectively.
Additionally, Dow components and financial behemoths, Bank of America Corporation (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM) surged 3.8% and 2.4%, respectively, following the broader rally in the financial sector. The financial sector was one of the leading gainers among S&P’s 10 industry groups and the Financial Select Sector SPDR (XLF) gained 1.6%. Among other financial shares, American Express Company (NYSE:AXP), Citigroup, Inc. (NYSE:C), The Goldman Sachs Group, Inc. (NYSE:GS), Morgan Stanley (NYSE:MS) and UBS AG (NYSE:UBS) gained 1.4%, 2.2%, 1.2%, 1.2% and 2.4%, respectively.
Separately, news from Europe was on the positive side. Developments from the continent have dampened investors’ mood since last week. In a sign of improved confidence in the nation’s economic scenario, Spain's 10-year bond yield dropped to 5.8% yesterday. For the moment, this was a significant enough catalyst to boost investor sentiment as investors are well aware of the consequences of surging borrowing costs. Not long ago Ireland, Portugal and Greece suffered economic turmoil with their borrowing costs reaching ‘unsustainable levels’. Also helping to keep the positive sentiment alive was European Central Bank’s Executive Board member Benoit Coeure’s statement that the Securities Market Programme (SMP) that authorized the ECB to buy euro-zone nations’ debt whenever needed remained intact.
ALCOA INC (AA): Free Stock Analysis Report
AMER EXPRESS CO (AXP): Free Stock Analysis Report
BOEING CO (BA): Free Stock Analysis Report
BANK OF AMER CP (BAC): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
INTEL CORP (INTC): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
UBS AG (UBS): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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