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Stock Market News for July 31, 2012

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It was a lackluster day of events yesterday as markets slipped marginally and volumes kept low. Benchmarks opted to take a breather after two-consecutive days of robust gains last week, which also set up the Dow’s and S&P 500’s largest highs since early May. Investors also awaited action from central banks both on the domestic front as well as from the other side of the pool before betting big bucks.

The Dow Jones Industrial Average (:DJI) slipped a mere 0.02% to close 2.65 points lower at 13,073.01. The Standard & Poor 500 (S&P 500) finished yesterday’s trading session at 1,385.30, down by only .67 of a point or 0.05%. The tech-laden Nasdaq Composite Index fell 0.4% and ended at 2,945.84. The fear-gauge CBOE Volatility Index (:VIX) jumped almost 8% and settled at 18.03. Consolidated volumes on the New York Stock Exchange, the Nasdaq and the American Stock Exchange were roughly 5.5 billion shares, lower than the year-to-date daily average of 6.75 billion shares. The decliners edged past the advancers on the NYSE; as for 50% stocks that declined, 47% stocks moved up.

The NYSE clocked volumes of around 3.2 billion shares, the lowest in two weeks. Thus, the Street was relatively idle yesterday and the markets’ hesitancy for change also showed the lack of major headlines. Investors are also gearing up for the last major week of second quarter earnings. Moreover, markets had a busy and steep ride upside with European Central Bank (:ECB) President Mario Draghi pledging to keep the euro-zone intact. Eventually, it was a calm session yesterday as the mood was generally cautious.

Draghi’s said mid-last week: "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro". Fresh European debt concerns had emerged after Spain’s 10-year bond yields crossed the ‘unsustainable’ 7% mark last week. Draghi’s comments were widely welcomed after Spain’s bond yield eased 40 basis points. European shares ended sharply higher and the ripple effect was evident in US markets too. The Dow had its fifth 200-plus points gain for 2012 on Thursday. Following reports of further developments on the same issue, benchmarks rose to their highest levels since early May on Friday. On the same day, the Dow rossed the 13, 000 mark for the first time since May 7 and the S&P 500 touched its highest level since May 3.

Friday’s rally was largely sparked by a report by French newspaper Le Monde that stated that the ECB was preparing to buy bonds issued by Italy and Spain. According to the report noted (as translated in English): “While it will take another few days or even weeks to finalize the device in question, the ECB would prepare an operation coordinated with the states may limit the surge in interest rates of Spain , but also the Italy”. French President Francois Hollande and German Chancellor Angela Merkel were also reportedly discussing these plans.

While hopes of fresh economic stimulus boosted markets last week, investors awaited the next course of action by the central bank head and Eurozone leaders. Their cautious stance kept trading low and restricted benchmarks’ movement.

Separately, investors also waited to see what is building up on the domestic front. Fresh hopes of a third round of quantitative easing (QE3) resurfaced last week and Friday’s bleak GDP data strengthened those hopes. Investors will have their eyes fixed on what the central bank has to say after the Federal Reserve’s policy makers' meet concludes on Wednesday. However, U.S. Treasury Secretary Timothy Geithner met Germany’s finance minister and the two resolved to step up measures to fix European and global financial woes.

As evident, lackluster trading meant almost no individual sector registered significant movement. However, considering other Dow components gained went as much as 1.4%, The Coca-Cola Company (NYSE:KO) was one of the biggest gainers among the Dow components and gained 1,.4%. Separately, JPMorgan Chase & Co. (NYSE:JPM) was the biggest drag, dropping 2.0%. Among the 30 Dow components, two of the blue-chip stocks also hit new 52-week highs. These were AT&T, Inc. (NYSE:T) and Wal-Mart Stores Inc. (NYSE:WMT) and they ended the day with gains of 0.8% and 0.6%, respectively.

Read the analyst report on KO

Read the analyst report on JPM

Read the analyst report on T

Read the analyst report on WMT

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