Stock Market News for December 23, 2011

Investors received a pre-Christmas gift in the form of encouraging economic data, which led the benchmarks higher on Thursday. The Dow and S&P 500 registered their third-straight finish in the green, but trading volumes continued to be on the low side.


The Dow Jones Industrial Average (DJIA) was up 0.5% and ended the day at 12,169.65. The Standard & Poor 500 (S&P 500) gained 0.8% and closed yesterday’s trading session at 1,254. The tech-laden Nasdaq Composite Index finished trading at 2,599.45, after edging up 0.8%. The fear-gauge CBOE Volatility Index (VIX) dropped 1.3% and settled at 21.16. Fortunately, the fear-gauge index has dropped to its lowest levels in many months, in an economic scenario that is highly uncertain and weighed down by lingering European debt woes. So far this week, the VIX has plunged 13%. The Street seemed to be taking it easy ahead of Christmas and the consolidated volumes on the New York Stock Exchange, the American Stock Exchange and Nasdaq were 5.88 billion shares, lower than last year’s daily average of 8.47 billion.


The Dow is now up 5.1% for the year, with five sessions still remaining. Robust gains on these days can lift the Dow further and bring cheer to investors. However, fellow benchmarks are still down for the year, with the S&P 500 almost at a break-even level, down 0.3% for the year. The Nasdaq has taken the heaviest losses among these benchmarks, and the index is down 2% for the week.


Economic data provided investors with a welcome reprieve after initial claims dropped to a three and half years low. According to the U.S. Department of Labor, the advance figure for seasonally adjusted initial claims decreased 4,000 from previous week’s revised figure of 368,000 to 364,000 for the week ending December 17. This comes as welcome news to investors as the job sector is undoubtedly a key indicator of the economic condition. Earlier this week, we have witnessed positive housing data, and combined with this strong jobs report, markets have received much needed impetus. The report also managed to beat the economists’ expectations who predicted a rise in initial claims to 375,000.


Additionally, the University of Michigan’ index on consumer sentiment came in at 69.9 for the month of December. This is higher than the prior month’s revised figure of 64.1 and was ahead of consensus estimates of 67.9. Meanwhile, the Conference Board’s leading indicator index was up 0.5% in November, clearly ahead of consensus estimates of a rise of 0.3%.


However, the government also reported that economic growth was slower in the third quarter. The report stated that gross domestic product grew at an annual rate of 1.8% in third quarter, lower than expectations of a rate of 2%. Nonetheless, the figure was higher than that recorded in the April-June period, which posted a rise of 1.3%.


Coming to sectoral stocks, the financial and the technology sectors led the benchmarks higher. The Financial Select Sector SPDR (XLF) was up 2.1% and bellwethers like Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), The Goldman Sachs Group, Inc. (NYSE:GS) and Wells Fargo & Company (NYSE:WFC) gained 4.6%, 3.5%, 6.5%, 2.6% and 1.3%, respectively. Among technology stocks, Intel Corporation (NASDAQ:INTC), Cisco Systems, Inc. (NASDAQ:CSCO), Hewlett-Packard Company (NYSE:HPQ) and Microsoft Corporation (NASDAQ:MSFT) gained 1.4%, 1.2%, 1.7% and 0.2%, respectively.

By: Zacks Equity Research, December 23, 2011

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