Stock Market News for June 20, 2014 – Zacks Investment Research

Benchmarks closed Thursday’s choppy session mostly higher as optimism from Wednesday’s policy statement continued. The modest gains helped S&P 500 hit another record high, but Nasdaq snapped its four-day winning streak. Stocks had dropped to the red zone for a considerable period during the afternoon before managing a rebound almost at the end of the session. Economic data on initial claims and business activity were positive. However, gains were muted though owing to investors locking their gains.

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The Dow Jones Industrial Average (DJI) added 0.1% to close at 16,921.46. The Standard & Poor 500 (S&P 500) too added 0.1% to finish at 16,921.46. However, the tech-laden Nasdaq Compsite Index dropped 0.1% and closed yesterday’s session at 4,359.33. The fear-gauge CBOE Volatility Index (VIX) was little changed yesterday, settling at 10.62 with a 0.09% gain. VIX moved up a day after it settled at its lowest since February 2007. Total volume on the New York Stock Exchange (NYSE) was about 2.96 billion. Advancers beat the declining stocks on the NYSE. For 55% stocks that advanced, 41% stocks closed in the red.

Optimism over the Federal Reserve’s commitment to continue with the low interest rate environment for “considerable time” continued to help benchmarks move up. At the end of its two-day meeting, the Federal Open Market Committee (FOMC) released a statement that said benchmark interest rates were left unchanged at 0.00-0.25%. The central bank trimmed its bond buyback plan for the fifth consecutive month, by $10 billion. The asset repurchase plan now stands at $35 billion a month.

The policy statement on Wednesday said: “It likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored”.

Separately, the central bank trimmed 2014 growth projection to 2.1% to 2.3%, down from 2.8% to 3%. Nonetheless, the central bank kept its growth forecast unchanged for 2015 and 2016 at 3% to 3.2% and 2.5% to 3%, respectively. The Fed also said: “Growth in economic activity has rebounded in recent months”.

Federal Reserve Chairwoman Janet Yellen’s press conference after the release of the FOMC statement was also a positive catalyst. According to Yellen, the central bank will consider a “wide range of indicators” on the labor market for decisions on rate hikes. She added there “is no mechanical formula” to help Fed decide on raising the rates. Speaking at the press conference, she was optimistic about the economic situation and said: “Economic activity is rebounding in the current quarter and will continue to expand at a moderate pace thereafter”.

Investors were also enthused by positive economic data. The Labor Department reported a 6,000 decline in initial claims to 312,000 in the week ending June 14. Consensus estimate had forecasted initial claims to be at 313,000. First time claims for unemployment benefits have now been dwelling around 300,000 for the past few months. This is somewhat identical to the situation prevailing in mid-2007.

The Philadelphia Fed’s manufacturing index showed business activity was at its best since September last year. According to the reports, regional manufacturing activity expanded to 17.8 in June from 15.4 in May, beating consensus estimate of a decline to 13.3. The regional federal-reserve-bank index measuring changes in business growth has now remained positive for four consecutive months.

Separately, the Conference Board reported that Leading Economic Index (LEI) for the U.S. improved 0.5% in May to 101.7. This follows a 0.3% improvement in April and a 1.0% uptrend in March. However, the 0.5% gain was shy of consensus estimates projecting a 0.6% gain.

However, gains were limited as investors locked in profits. Profit booking took some of the sheen away and benchmarks had dropped into the red by noon. An uptick during the the final hour helped Dow and S&P 500 extend gains, but the tech-heavy Nasdaq stayed in the red.

The technology sector ended in the red with Technology Select Sector SPDR ETF (XLK) dropping 0.2%. Key stocks such as Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NYSE:ORCL), NVIDIA Corporation (NASDAQ:NVDA) and Broadcom Corp. (NASDAQ:BRCM) dropped 0.4%, 0.3%,0.7%, 2.3% and 0.3%, respectively.

Utilities Select Sector SPDR ETF (XLU) was the best gainer for the second straight day and ended 0.8% higher. Duke Energy Corporation (NYSE:DUK), NextEra Energy, Inc. (NYSE:NEE), Dominion Resources, Inc. (NYSE:D), Southern Company (NYSE:SO), Exelon Corporation (NYSE:EXC) gained 1.1%, 0.5%, 1.5%, 0.4% and 0.9%, respectively.

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Stock Market News for June 20, 2014 – Zacks Investment Research

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