(XLF) Stock Market News for September 16, 2011 – Market News

Coordinated action between the European Central Bank and international money lenders eased concerns about the European debt situation, egging on the markets to their fourth-straight day of gains. With investors placing greater emphasis on news from across the Atlantic, disappointing US jobs data failed to hurt the benchmarks.

The Dow Jones Industrial Average (DJIA) gained 186 points or 1.7% to finish the day at 11,433.18. The Standard & Poor 500 (S&P 500) gained 1.7% to settle at 1,209.11. The Nasdaq Composite Index moved up 1.3% to close the day at 2,607.07. The fear-gauge CBOE Volatility Index (VIX) slid substantively to less than 32. The fear-gauge index looks en route to drop below the technical-level of 30. The VIX had even recorded its sharpest increase since February 2007 after S&P’s downgrade of the US’s credit rating last month. Consolidated volumes on the New York Stock Exchange, Amex and Nasdaq remained marginally below last year’s average of 7.6 billion, at 7.5 billion shares. On the NYSE, for every three stocks that moved up, only one stock was on the declining side.

All the 10 industry groups in the S&P 500 posted gains, with financials emerging as one of the leaders. The Financial Select Sector SPDR (XLF) Fund surged 2.5% and financial bellwethers like Morgan Stanley (NYSE:MS), The Goldman Sachs Group, Inc. (NYSE:GS), Bank of America Corporation (NYSE:BAC), Wells Fargo & Company (NYSE:WFC), Citigroup, Inc. (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) gained 7.2%, 3.3%, 4.0%, 2.0%, 4.4% and 3.1%, respectively.

The surge in the banking sector and the broader markets was spurred by news of ECB coordinating with the Federal Reserve and other central banks, smoothening the way for the euro zone to borrow greenbacks. The ECB in coordination with the Fed and major banks including Bank of England, the Bank of Japan and the Swiss National Bank will enable European banks to borrow dollars for the next three months, significantly longer than the initially agreed period of one more week.

Lingering debt-concerns continue to plague the euro-zone and have dented US indices since late last year when Ireland faced a debt crunch. On the third anniversary of the Lehman Brothers’ collapse, this was the first coordinated move since May 2010 to provide enough cash to the euro zone for the remainder of the year.

This development comes a day after European leaders provided assurances that they would prevent Greece from defaulting. On Wednesday, German Chancellor Angela Merkel and French President Nicolas Sarkozy had provided assurances that Greece would very much remain a part of the euro zone. However, Steffen Seibert, spokesman for Angela Merkel, said German and French leaders also urged Greek to implement its already-agreed financial plans “strictly and effectively”. Negating all speculations of Greece being asked to exit the 17-nation euro zone, the French leader assured all help to avoid a Greek default. Greek Prime Minister George Papandreou also participated in the conference call and according to Seibert: “The Greek prime minister has reaffirmed the absolute determination of his government to take all necessary measures to put into practice given commitments in its entirety”.

While investors were buoyed by positives from the European front, the US Labor Department had some bad news in store as initial claims hit their highest level since late June. Jobs markets have failed to evoke any optimism about the economic recovery as data has continuously shown a negative trend for the past few months. This time around, the Labor Department reported the advance figure for seasonally adjusted initial claims for the week ending September 10 to have increased 11,000 from the prior week to 428,000. This also surpassed expectations that initial claims would remain flat at 417,000.

Meanwhile, an Empire State Manufacturing Survey conducted by the Federal Reserve Bank of New York showed a contraction in the manufacturing in New York at a faster rate, while manufacturing in the Philadelphia region declined consecutively for the second month.

However, economic reports were not totally devoid of any positives, as the Board of Governors of the Federal Reserve System reported a hike in industrial production in August. According to the report: “Industrial production increased 0.2 percent in August after having advanced 0.9 percent in July. Manufacturing rose 0.5 percent in August, after a similarly sized gain in July, and the rates of change were revised down slightly in April, May, and June”.

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