Markets ended its choppy session in the green as continuing positive impact from the European Central Bank’s monetary stimulus announcement offset concerns following Syriza’s win in Greece. Moreover, a rally in homebuilder stocks sparked by strong earnings results from DR Horton boosted benchmarks on Monday. Meanwhile, encouraging comments from OPEC’s secretary-general helped energy sectors to register solid gains.
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The Dow Jones Industrial Average (DJI) gained a meager 0.03% to close at 17,678.70. The Standard & Poor 500 (S&P 500) rose about 0.3% to close at 2,057.09. The tech-laden Nasdaq Composite Index closed at 4,771.76; also rising 0.3%. The fear-gauge CBOE Volatility Index (VIX) declined 6.8% to settle at 15.52. A total of about 6.27 billion shares were traded on Monday, lower than monthly average of 7.26 billion. Advancers outpaced declining stocks on the NYSE. For 67% stocks that advanced, 30% declined.
On Sunday, Greece’s Syriza party won the country’s general elections. However, Syriza failed to secure majority in the parliament and is in the process to from a coalition government.
The election result raised worries about Greece’s exit from the Eurozone. This is because Syriza’s leader Alexis Tsipras said that the victory meant the end of the “viscious cycle of austerity”. He said: “Greece leaves behinds catastrophic austerity, it leaves behind fear and authoritarianism, it leaves behind five years of humiliation and anguish… Our priority from the very first day will be to deal with the big wounds left by the crisis.”
However, the ECB monetary stimulus announcement gave markets enough ammunition to withstand the new Greece-centric worries. ECB said it will buy bonds worth 60 billion euros a month through a quantitative easing program, starting in March. The QE program will continue till Sep 2016. The ECB plans to increase money supply by more than 1 trillion euros ($1.16 trillion) by the end of Sep 2016.
On the domestic front, shares of DR Horton Inc. (DHI – Analyst Report) jumped 5.5% after announcing first quarter fiscal 2015 adjusted earnings per share of 39 cents, beating the Zacks Consensus Estimate of 35 cents. Moreover, earnings increased 8.3% year over year on solid homebuilding revenues. Homebuilder’s quarterly revenues of $2.25 billion climbed 38% year over year and also beat the Zacks Consensus Estimate of $2.11 billion.
Encouraging earnings report from DR Horton helped the SPDR S&P Homebuilders (XHB) to gain 1.6%. The sector was the biggest gainer among the S&P 500 sectors on Monday. Key homebuilder stocks including PulteGroup, Inc. (PHM – Analyst Report), Toll Brothers Inc. (TOL – Analyst Report), Lennar Corp. (LEN – Analyst Report) and KB Home (KBH – Analyst Report) rose 2.5%, 1.2%, 2.7% and 1.8%, respectively. Eight out of 10 S&P 500 sectors posted gains yesterday.
Moreover, energy stocks were boosted on Monday by positive comment of OPEC Secretary-General Abdullah al-Badri that oil prices could rebound sooner. He said: “Maybe prices have reached a bottom…but I am sure the price will rebound.” The Energy Select Sector SPDR (XLE) gained 1.4% following this comment. Key energy stocks including Chesapeake Energy Corporation (CHK – Analyst Report), Chevron Corporation (CVX – Analyst Report), Halliburton Company (HAL – Analyst Report) and Baker Hughes Incorporated (BHI – Analyst Report) gained 2.4%, 1.9%, 1.2% and 0.9%, respectively. However, oil prices continued to decline on Monday as price of WTI crude oil declined nearly 1% to an almost six-year low.
Separately, shares of MeadWestvaco Corporation (MWV – Analyst Report) surged 14% after announcing that the company will merge with Rock-Tenn Company (RKT – Analyst Report) to form a $16 billion packaging company. The deal will form the second largest domestic packaging company as International Paper Company (IP) would continue at the top. It was also reported that MeadWestvaco will have 50.1% stake in the company. Shares of Rock-Tenn rose 6.1% following the announcement. MeadWestvaco was the biggest gainer among the S&P 500 companies.
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