US Market soars on good economic report
In the US stock market on Thursday, 28 August, US stocks registered
substantial gains as investors found back some trust in the US economy.
Stocks took off early following the announcement of second quarter GDP
data. Trading volume was once again substantially light showing no
conviction among buyers. The economic data that hit the wires at US
stocks market tried to prove the resilience of the US economy once
again. Financial sector also lent its share of support. Nine of the ten
sectors ended in the green today, energy being the sole laggard.
The Dow Jones industrial Average ended the day with a gain of 212.67
points at 11,715.18. The Nasdaq Composite Index, finished higher by
29.2 points at 2,411.64. S&P 500 finished higher by 19.02 points at
1,300.68.
Twenty-nine out of thirty Dow stocks ended in the
green led by AIG. Coca-Cola was the exception which was downgraded at
Credit Suisse to Neutral from Outperform.
Among economic news
of the day at Wall Street, the Commerce Department reported today that
the U.S. economy grew at a 3.3% real annual pace in the second quarter,
nearly double the initial 1.9% estimate offered last month.
The upward revision to GDP was largely due to increased exports and
larger inventory accumulation. The report also said that final sales
increased at an annualized 4.8%, much better than last month's estimate
of 3.9%. Core consumer prices rose at a 2.1% annual pace in the
quarter, unrevised from the initial estimate. Economy-wide inflation
jumped 4.2% in the June quarter.
Separately, the Labor
Department said first-time applications for state unemployment benefits
fell 10,000 in the latest weekly data to 425,000, while the four-week
average of continuing claims climbed to a near five-year high of 3.37
million. The numbers reflect soft labor conditions and indicate a
modest decline for August nonfarm payrolls is likely.
The
financial sector also lent its support today fairly. Fannie Mae and
Freddie Mac gained attention following Fannie's announcement that it is
shaking-up its management team to control credit losses, conserve
capital, and provide liquidity to the mortgage market. Also, bond
insurer MBIA soared after the company announced it is going to reinsure
a $184 billion par value portfolio of municipal bonds insured by
Financial Guaranty Insurance Company.
Indian ADRs ended mixed today. HDFC Bank and ICICI Bank were the largest gainers soaring 2.4% and 2.8% respectively.
At the crude market on Thursday, crude oil fell more than $2 a barrel
after the International Energy Agency said it would tap strategic
stockpiles if Tropical Storm Gustav disrupts energy production in the
Gulf of Mexico. Crude oil for October delivery fell $2.56 (2.2%) to
settle at $115.59 a barrel.
At the currency markets on
Thursday, the dollar rebounded against the euro after a report showed
the U.S. economy expanded in the second quarter faster than previously
estimated and crude-oil prices fell. The dollar index, a measure of the
greenback against a trade-weighted basket of currencies, was up 0.1%.
The index fell previously in morning trading.
Trading volume on
the NYSE failed to break one billion shares for the ninth straight
session. Volume typically exceeds the one billion shares mark with
relative ease. The lack of trading suggests there may be little
conviction behind the stock market's recent moves. Nonetheless, the
session's advance remains pleasing to bullish investors.
For
tomorrow, the main focus will be the July personal income and spending
report. The August Chicago PMI, a regional manufacturing survey, and
the revised August University of Michigan consumer sentiment reading
are also set for release following that.
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