(XLF) Stock Market News for October 5, 2012 – Market News

A lower-than-expected increase in initial claims coupled with encouraging same store sale numbers from bellwether retailers helped markets close in the green. Moreover, ECB President Mario Draghi said once conditions are met, the European Central Bank would buy government bonds. Yesterday’s gains led the S&P 500 to clinch its fourth win in a row and the upcoming nonfarm payroll data from the government will be crucial in deciding if the index can achieve a five-year high.

The Dow Jones Industrial Average (DJI) gained 0.6% and ended at 13,575.36. The Standard & Poor 500 (S&P 500) was up 0.7% and finished yesterday’s trading session at 1,461.40. The tech-laden Nasdaq Composite Index added 0.5% to climb to 3,149.46. The fear-gauge CBOE Volatility Index (VIX) slumped 5.7% to settle at 14.55. Consolidated volumes on the New York Stock Exchange, Nasdaq and American Stock Exchange were roughly 6.1 billion shares, just short of the daily average volume of 6.38 billion shares. The advancers easily outnumbered declining stocks on the NYSE; as for 71% stocks that gained, 26% ended lower.

Markets added gains yesterday largely banking on the smaller-than-expected jump in initial claims last week. According to the U.S. Department of Labor, seasonally adjusted initial claims for the week ending September 29 rose 4,000 from the prior week to 367,000. This was lower than consensus estimates of 368, 000. Apart from the slight rise in first time unemployment benefit claims, the 4-week moving average remained unchanged from the previous week at 375,000.

The initial claims report came just a day after Automatic Data Processing’s (NASDAQ:ADP) National Employment Report. ADP data revealed that U.S. companies added 162,000 jobs in September, higher than the expected 143,000. While two back-to-back and bullish employment reports brought relief to investors, they now await the government’s nonfarm payroll data that is scheduled for release on Friday.

Nonfarm payroll numbers will not only reveal current labor conditions, but a positive report will most likely push S&P 500 to its highest level in five years. So far this week, the S&P 500 has outperformed fellow benchmarks with a 1.4% gain as compared to Dow’s and Nasdaq’s gains of 1% and 1.1%, respectively. Moreover, none of the 10 industry groups of the S&P ended in the red yesterday and financials were one of the largest gainers.

The Financial Select Sector SPDR (XLF) added 1.5% and stocks such as American Express Company (NYSE:AXP), Bank of America Corporation (NYSE:BAC), Citigroup, Inc. (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), The Goldman Sachs Group, Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) jumped 1.7%, 3.3%, 2.6%, 2.4%, 1.7% and 2.6%, respectively.

Talking about the sectors and individual stocks, the retail sector was also a big gainer yesterday. Bellwether retailers such as Costco Wholesale Corporation (NASDAQ:COST), Gap Inc. (NYSE:GPS) and The TJX Companies, Inc. (NYSE:TJX) gained 1.9%, 1.0%, and 0.6%, respectively, following encouraging same store sales numbers. The gains in these retail heavyweights and the eventual 1.6% jump in SPDR S&P Retail (XRT) were also a major contributor to the broader markets’ gains yesterday.

Positive news was not restricted to the domestic front. European Central Bank (ECB) President Mario Draghi said yesterday that the central bank was prepared to buy government bonds once lending countries meet conditions. It about a month ago that Mario Draghi had first announced the bond repurchase plan to aid troubled Euro-zone economies. About the bond plan, termed Outright Monetary Transactions (OMT), Draghi said: “I could say that today, we are ready with our OMT…We have a fully effective backstop mechanism in place once all the prerequisites are in place as well”.

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