Stock Market News for January 08, 2015 – Zacks Investment Research

Benchmarks added significant gains yesterday banking on a rebound in oil prices and better-than-expected private sector jobs report. Fed minutes’ assurance that the central bank will be “patient” before hiking interest rates added to the bullish sentiment. Possibility of additional stimulus measures in the Eurozone and subdued fears about Greece exiting the European Union also boosted markets.

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 1.2% or 212.88 points to close at 17,584.52. The Standard & Poor 500 (S&P 500) went up 1.2% to close at 2,025.90. The tech-laden Nasdaq Composite Index closed at 4,650.47; gaining 1.3%. The fear-gauge CBOE Volatility Index (VIX) declined 8.6% to settle at 19.31. A total of about 7.1 billion shares were traded on Wednesday, higher than the last five session’s average of 6.2 billion. Advancers outpaced declining stocks on the NYSE. For 75% stocks that advanced, 23% declined.

The S&P 500 posted its biggest one-day percentage gain on Wednesday since Dec 18, 2014. The indexes’ rally came after it had declined for the fifth-straight session on Tuesday, its longest streak of consecutive losses since Dec 2013. The Dow also recovered on Wednesday, with 27 out of its 30 components ending in positive territory. The Nasdaq too ended a five-day losing streak and settled in the green.

Oil prices snapped a four-day losing streak and ended higher on Wednesday. Oil prices made a comeback after the U.S. Energy Information Administration (EIA) reported that U.S. crude inventories dropped last week. The report also stated stockpiles of gasoline and distillate fuel surged by record levels. The West Texas Intermediate (WTI) crude oil price gained 1.5% to settle at $48.65 per barrel. On Tuesday, WTI crude oil price had dropped below the psychological level of $50 a barrel.

Brent crude oil price also increased 0.1% to settle at $51.15 per barrel. During the trading session, Brent crude oil price had touched $49.66 a barrel, the lowest level since Apr 29, 2009. The rebound in oil prices helped the energy sector end in positive territory on Wednesday. The Energy Select Sector SPDR (XLE) gained 0.2%.

Encouraging private-sector hiring numbers also had a positive impact on the broader markets. The national employment report from Automatic Data Processing, Inc. (ADP – Analyst Report) showed private sector hiring improved in December. The report stated 241,000 private jobs were added in December. This was higher than expectations of 235,000 job additions. The figure was more than November’s upwardly revised figure of 227,000.

The strong ADP report on private-sector hiring came in ahead of the U.S. Bureau of Labor Statistics’ nonfarm payroll data for December. Total non-farm payroll accounts for approximately 80% of the workers who produce the entire GDP of the United States. Analysts are expecting an addition of 237,000 nonfarm payroll jobs. Moreover, they believe unemployment rate will come in at 5.7%.

Separately, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, reported that goods and services deficit decreased in November to $39 billion from $42.2 billion in October. Exports in November decreased $2.0 billion to $196.4 billion, while imports decreased $5.2 billion to $235.4 billion.

Meanwhile, benchmarks were able to hold on to their gains after minutes of the Federal Open Market Committee noted that they “would want to be reasonably confident that inflation will move back toward 2% over time.” According to minutes of the Federal Reserve’s December meeting, officials believe inflation rate won’t climb to Fed’s 2% target for some time due to lower energy prices and stronger dollar. However, minutes stated: “Most participants thought the reference to patience indicated that the Committee was unlikely to begin the normalization process for at least the next couple of meetings.” The central bank could raise key interest rates even with low inflation, but not before April.

Speaking at a press conference, Fed Chairwoman Janet Yellen said: “The timing of the initial rise in the Fed funds target as well as the path for the target thereafter are contingent on economic conditions…Monetary policy will still be very accommodative for a long time” after rates rise.

Investors were also enthused over a possibility of additional stimulus measures in the Eurozone. A drop in Eurozone Consumer Price Index (CPI) increased pressure on the European Central Bank to begin quantitative easing program at its January meeting. Eurozone CPI dropped 2% year-over-year in December. Moreover, Germany’s initiative to hold discussions with Greece’s next government on issues related to the debt crisis, eased concerns over a Greek exit from the European Union.

Coming back to domestic front, homebuilder stocks gained the most among the S&P 500 sectors. The SPDR S&P Homebuilders (XHB) gained 2.7% after a Bloomberg report stated that U.S. President Barack Obama is expected to announce a reduction in Federal Housing Administration insurance premiums on mortgages. Obama is set to announce the new housing policy on Thursday. Key homebuilder stocks including Toll Brothers Inc. (TOL – Analyst Report), DR Horton Inc. (DHI – Analyst Report), Lennar Corp. (LEN – Analyst Report), PulteGroup, Inc. (PHM – Analyst Report) and Beazer Homes USA Inc. (BZH – Snapshot Report) gained 2.3%, 5.1%, 4.9%, 4.9% and 4.3%, respectively. Overall, all 10 sectors of the S&P 500 ended in the green.

Among individual stocks, shares of J. C. Penney Company, Inc. (JCP – Analyst Report) soared 20.3% fueled by strong comparable store sales data. Shares of Monsanto Company (MON – Analyst Report) also went up 1.3% after the company reported better-than-expected bottom-line results for first quarter of fiscal 2015 ending Nov 30, 2014. The company posted adjusted earnings of 47 cents per share, above the Zacks Consensus Estimate of 34 cents.

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Stock Market News for January 08, 2015 – Zacks Investment Research