Benchmarks minted gains after three consecutive days of losses, propelled by better-than-expected Chinese trade data and satisfactory initial claims numbers. Encouraging earnings from major companies also boosted investors’ sentiment yesterday. The three days of losses owed much to investors’ jitters after two fed officials fueled speculation that the central bank may start trimming its massive bond buying program next month. Nine out of the ten S&P 500 industry groups finished in the green with material sector leading the pack.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (:DJI) gained 0.2% to close the day at 15,498.32. The S&P 500 increased 0.4% to finish yesterday’s trading session at 1,697.48. The tech-laden Nasdaq Composite Index added 0.4% to end at 3,669.124. The fear-gauge CBOE Volatility Index (:VIX) slipped 1.9% to settle at 12.73. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.81 billion shares, well below 2013’s average of 6.35 billion shares. Advancing stocks outnumbered the decliners. For 66% shares that advanced, only 31% declined.
Benchmarks have suffered this week on concerns over the future of the Federal Reserve’s bond buying program. Gains in the equities this year is primarily driven by bond buying program. Investors are apprehensive about what course the economic growth may take and the equities’ rally is also feared to halt once the central bank’s bond buying program ends.
Yesterday, China’s encouraging trade data had much role to play in the benchmarks’ move to the north. According to the data released by the Customs Administration, exports increased 5.1% in July from the year-ago period. It was also well ahead of the expectations of 3% gain. Surprisingly, imports of the country climbed 10.9% on a year-over-year basis. Owing to this, the trade surplus of the country contracted to $17.8 billion. Annual exports to the U.S and Europe increased 5.3% and 2.8%, respectively.
Also helping the rally was the U.S. Department of Labor’s initial claims numbers. The number of Americans filing for unemployment benefits increased 5,000 from prior week’s revised figure to 333,000 in the week ending Aug 3. However, this was better than the consensus estimate of 339,000. More importantly, the four week moving average declined from previous week’s revised figure of 341,750 to 335,500, its lowest level in six years. Improving job market scenario in the recent days indicates that the health of the U.S economy is improving.
On the earnings front, Tesla Motors Inc (NASDAQ:TSLA) reported strong second quarter earnings. The company’s earnings and revenues blew past the Street’s expectations. Earnings of the company were mostly driven by the success of the Model S and an improvement in the automotive gross margin. Revenues increased fifteen times to $405 million from the year-ago figure of $27 million. The company stated: “While profits were still modest in absolute terms and not our primary mission, net income increased by 70 percent from last quarter, driven by record Model S deliveries and a significant improvement in automotive gross margin.” Shares spiked over 14.0% yesterday.
Shares of Groupon Inc (NASDAQ:GRPN) jumped 22.0% yesterday after the company announced its quarterly results late Wednesday. The company’s revenues beat the Street’s expectations. Revenues climbed 7.2% to $609 million from $568 million a year before.
Materials sector was the biggest gainer among the S&P 500 industry groups and the Materials Select Sector SPDR (XLB) gained 1.5%. Stocks such as Alcoa Inc (NYSE:AA), Airgas, Inc. (NYSE:ARG), The Dow Chemical Company (NYSE:DOW), Monsanto Company (NYSE:MON), Airgas, Inc. (NYSE:ARG) and Huntsman Corporation (NYSE:HUN) gained 1.5%, 1.7%, 2.5%, 0.4% and 0.3%, respectively.
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