(GDP) Stock Market News for August 29, 2011 – Market News

Wall Street registered its first weekly gains in more than a month as the Fed Chairman’s speech sparked hopes of economic stimulus and assured investors that the US is well on course for long-term economic growth. The tech sector helped push the markets higher on Friday, enabling the markets to post its best weekly gains in eight weeks.

In another three-digit movement for the Dow Jones Industrial Average (DJIA), the index gained 1.2% to settle at 11,284.54. The Standard & Poor 500 (S&P 500) finished the day at 1,176.80 after climbing 1.5%. The tech-laden Nasdaq Composite Index jumped 2.5% and wrapped up the day at 2,479.85. The fear-gauge CBOE Volatility Index slipped 10.2% to end below 36. Earlier, the fear-gauge index had even dropped by 14% to a session low of 34.33. On the New York Stock Exchange, Amex and Nasdaq, consolidated volumes equaled the year-to-date average of 7.9 billion shares. On the NYSE, for every five stocks that moved up, only one stock was on the declining side. Putting an end to a four-week losing streak, the markets finally finished in the green for the week, and also posted their best gains in eight weeks. For the week, the Dow, S&P 500 and the Nasdaq were up 4.3%, 4.7% and 5.9%, respectively.

Only three of the 30 Dow components had to settle marginally lower in the red zone, while all the rest rode the positive momentum and the majority enjoyed substantive gains. The three decliners were Hewlett-Packard Company (NYSE:HPQ), AT&T, Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ) and they shed 0.8%, 0.07% and 0.03%, respectively. These marginal losses were washed out by the 27 components that moved up and the leading gainers included Boeing Co. (NYSE:BA), Caterpillar Inc. (NYSE:CAT), International Business Machines Corp. (NYSE:IBM), 3M Co. (NYSE:MMM) and Exxon Mobil Corporation (NYSE:XOM), and they were up 2.8%, 2.3%, 2.2%, 2.3% and 1.2% respectively. However, the blue-chip index had dropped 200 points initially before recouping and regaining a three-digit uptrend.

The blue-chip index’s initial fall was a reaction to Federal Reserve Chairman Ben Bernanke’s speech. Delivering his speech at Jackson Hole, Wyoming, Bernanke did not hint at a third round of monetary easing, but neither did he rule put chances of further policy intervention. Bernanke did stop short of announcing the asset-purchase plan, but he kept hopes alive as he stated: “The Fed has a range of tools that could be used to provide additional monetary stimulus.” He further added that the Fed “will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days instead of one to allow a fuller discussion”. Market watchers interpret the comments to be positively biased towards the possibility of a third round of monetary policy measures. Additionally, Bernanke did strike a chord of comfort as he projected a likely upswing in the US economy in the second half of the fiscal year, though he acknowledged the slow recovery in the nation.

Hopes of a third round of quantitative easing will keep the bulls happy and if the central bank ultimately goes ahead and announces economic stimulus measures, it will be of great help to the recently faltering markets. Last year, Bernanke’s announcement of the second round of quantitative easing had significantly lifted the mood and had been able to sustain a decently bullish sentiment right till its scheduled end this year. Markets have been faltering as fears of a recession dampened sentiment. Also, debt woes from Europe have had investors worried for some time now

On that note Bernanke said: “I have confidence that our European colleagues fully appreciate what is at stake in the difficult issues they are now confronting and that, over time, they will take all necessary and appropriate steps to address those issues effectively and comprehensively”.

Also boosting the sentiment was the buoyant technology sector. Among the gainers were Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), Adobe Systems Inc. (NASDAQ:ADBE), Electronic Arts Inc. (NASDAQ:ERTS), Intel Corporation (NASDAQ:INTC) and Oracle Corp. (NASDAQ:ORCL) and they surged 2.8%, 2.6%, 2.8%, 5.4%, 1.8% and 2.9%, respectively.

On the economic front, reports were not outright positive as Gross Domestic Product (GDP) growth rate was slower than expected and consumer sentiment hit its lowest point since winter 2008.

According to the Bureau of Economic Analysis, real gross domestic product inched up by 1% in the second quarter of 2011. This is lower than economists’ expectation of a 1.1% increase. Nonetheless, the GDP was up from 0.4% reported in the first quarter 2011. The Commerce Department stated: The increase in real GDP in the second quarter primarily reflected positive contributions from nonresidential fixed investment, exports, personal consumption expenditures (PCE), and federal government spending that were partly offset by negative contributions from state and local government spending and private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased”. The report also said that the price index for gross domestic purchases increased 3.3% in the second quarter and real personal consumption expenditures increased 0.4% in the second quarter.

Separately, the Thomson Reuters/University of Michigan’s consumer sentiment index climbed up from its mid-August level, but was down from the previous month and continued to linger near recession lows. Consumer sentiment fell to 55.7 from 63.7 in the previous month, but was up from August’s preliminary reading of 54.9.

APPLE INC (AAPL): Free Stock Analysis Report

ADOBE SYSTEMS (ADBE): Free Stock Analysis Report

BOEING CO (BA): Free Stock Analysis Report

CATERPILLAR INC (CAT): Free Stock Analysis Report

ELECTR ARTS INC (ERTS): Free Stock Analysis Report

HEWLETT PACKARD (HPQ): Free Stock Analysis Report

INTL BUS MACH (IBM): Free Stock Analysis Report

INTEL CORP (INTC): Free Stock Analysis Report

3M CO (MMM): Free Stock Analysis Report

MICROSOFT CORP (MSFT): Free Stock Analysis Report

ORACLE CORP (ORCL): Free Stock Analysis Report

AT&T INC (T): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

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