Stocks Rise Amid Economic Signs and European Bank Hopes

Strategic Insights -

Markets moved upward on Wednesday as economic indicators, including improved job numbers and sustained growth in the service sector, began to show signs of stabilization in the US economy. Despite concerns about Europe's debt crisis, investors gained confidence in the bank recapitalization efforts and stronger earnings from corporations. This sentiment was also bolstered by the gains in the European markets, which saw a significant increase in bank stocks.

Key Takeaways:

  • The Dow Jones Industrial Average rose 40 points (0.4%) to 10,849, driven by gains in materials and technology stocks.
  • The Standard & Poor's 500-stock index added 6 points (0.6%) to 1,130, with technology and financial sectors showing strength.
  • Cisco Systems Inc. (CSCO) led the gainers, rising 4.7%, while Hewlett-Packard Co. (HPQ) and Microsoft Corp. (MSFT) added 4.2% and 2.5% respectively.
  • Bank of America Corp. (BAC) declined 2.4%, while equity residential and real estate companies like AvalonBay Communities Inc. (AVB) and Kimco Realty Corp. (KIM) slumped by 4% or more.
  • Jim Sullivan, managing director of REIT research at Green Street Advisors, attributed the decline to concerns over the European debt crisis and its potential impact on the US credit market.
  • Neil Hennessy, president of Hennessy Funds, stated that corporate earnings, which began next week, will continue to demonstrate strong profits and resilience in the face of economic challenges.
  • European markets, including France's CAC-40 index and Germany's DAX, surged by 4.3% and 4.9% respectively, led by bank stocks.

Statistics:

  • The US economy added 91,000 new private-sector jobs in September, exceeding the estimated 75,000 increase.
  • The Dow staged a surge in the final hour of trading on Tuesday, closing up 153 points after being down as much as 251 points at its intraday low.
  • The S&P 500 had crossed into bear-market territory on an intraday basis on Tuesday, reaching a low of 1,075, about 22% below the May 2 high of 1,371.
  • The Stoxx Europe 600 surged 3.1%, with French, German, and other European markets also reporting gains.
  • Gold futures rose to about $1,650 an ounce, and crude-oil futures rallied 4.6% to over $79 a barrel.
  • The US dollar remained flat against the euro and yen.

Sources:

  • Dow Jones Commodities News Select via Comtex
  • Jonathan Cheng, "U.S. Stocks Rise Amid Economic Signs and European Bank Hopes"
  • Automatic Data Processing
  • Green Street Advisors
  • Hennessy Funds
  • Labor Department
  • Natixis
  • New York's attorney general
  • Citigroup
  • Goldman Sachs
  • Yum! Brands Inc.