Encouraging earnings results coupled with consumer confidence data and leading indicators drove the markets higher on Friday. The Wall Street Journal termed it as a ‘nail biting’ session as the Dow closed four points short of the best level since December 2007 and S&P 500 was close to its four-year high. Meanwhile, the trading range was tight and the Dow moved in the tightest range since two years. However, it was yet again a lackluster day of trading with volumes remaining low. Friday’s gains also ensured that the Dow and S&P 500 log their sixth week of consecutive gains.
The Dow Jones Industrial Average (:DJI) gained 0.2% and ended at 13,275.20. The Standard & Poor 500 (S&P 500) also added 0.2% and finished Friday’s trading session at 1,418.16. The tech-laden Nasdaq Composite Index jumped 0.5% and closed at 3,076.59. The fear-gauge CBOE Volatility Index (:VIX) slumped 5.9% to drop to 13.45. Total volume on the New York Stock Exchange was a mere 2.9 billion shares. The advancers outnumbered the decliners on the NYSE; as for 59% stocks that gained, 36% stocks closed lower.
Statistically, investors had a lot to cheer about on Friday. The VIX, which reflects the amount of fear and apprehension in the markets, was down to its lowest level in five years. More importantly, investors were gearing up to see the benchmarks trade at their multi-year highs. The Dow fell a mere four points short of its highest level achieved in December 2007, ahead of the recession. For S&P 500, it was just a point short of a four-year high. Also, the gains ensured that Dow and S&P 500 finished their sixth consecutive weeks of gains. For the week, the Dow, S&P 500 and the Nasdaq gained 0.5%, 0.9%, and 1.8%, respectively.
However, volumes have remained low all through this week. Thus, the gains and the benchmarks approaching their multi-year highs come at a time when investors are not really betting big bucks. Headlines have been scanty on certain days recently, which coupled with the investors wait-and-watch attitude and the summer holidays kept market movement in check. Strategists have also opined that investors are awaiting concrete action from central banks of U.S. Europe and even China.
Coming to Friday’s developments, retailers cheered the mood as they came out with bright earnings results. Retail heavyweight, Gap Inc. (NYSE:GPS) jumped 4.8% as it reported second quarter income to have soared 29%. The company also cheered the mood with its yearly guidance. The J. M. Smucker Company’s (NYSE:SJM) fiscal first quarter 2013 results outshined the estimates and it also guided that the fiscal 2013 earnings are expected to be at the higher end of its guidance range. The news was a lot of encouragement and the shares surged 5.1%. Separately, ANN INC’s (NYSE:ANN) quarterly earnings were up 24% and the company also upped its guidance. Thus, the shares were set for a strong upward movement and they ended 20.4% higher.
The retailers did help the markets stay in the positive zone. However, economic readings also chipped in to sustain benchmarks’ stay in the green. The University of Michigan-Thomson Reuters consumer-sentiment index was up to a preliminary reading of 73.6 in August, jumping to the highest level in three months. This was up from July’s reading of 72.3. Zacks notes, consumers are more inclined to spend when they feel confident about their financial and employment prospects. Both the index of consumer confidence from the Conference Board and the index from the University of Michigan are good leading indicators of consumer spending. Thus, the jump in the index was a key positive for the economy. The reading of 73.6 also topped the consensus estimates of 72.3.
Separately, ‘the Index of Leading Economic Indicators, which is calculated by The Conference Board, is used as a barometer of economic activity over a range of three to six months’ was up by 0.4% to 95.8 in July. This was contrary to the 0.4% fall in June. The leading indicators also increased more than the consensus estimates of 0.2%. Fall in initial claims helped the leading indicators come out with better-than-expected report.
On Friday, industry heavyweight and technological giant Apple Inc. (NASDAQ:AAPL) jumped 1.9% to its all-time high of $648.11. Apple is Nasdaq’s biggest component and thus it helped Nasdaq outperform the fellow benchmarks. Moreover, Apple’s new high was also a positive for the broader markets and other technology shares including Google Inc. (NASDAQ:GOOG), Oracle Corporation (NASDAQ:ORCL), Cisco Systems, Inc. (NASDAQ:CSCO) and Red Hat, Inc. (NYSE:RHT) jumped 0.6%, 0.5%, 0.2% and 2.0%, respectively.
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