The bulls, in convincing fashion, made it two consecutive days in the driver’s seat. From the get-go today, the major U.S. equity indexes were comfortably in positive territory, with market participants greeting news that Germany is on board with France’s proposed plan to bring the private sector in to help Greece shore up its finances. This, along with strong gains across all the major sectors, most notably the energy and technology groups, pushed equities significantly higher, with the Dow Jones Industrials Average up triple digits at the closing bell. The Dow 30, while ahead nicely, still trailed the other four major indexes—the NASDAQ, the S&P 500 Index, the small-cap Russell 2000, and the S&P Mid-Cap 400 Index—in percentage terms. The tech-heavy NASDAQ was helped by the noted jump in technology stocks.
Although nothing has been ironed out in Europe, a bailout plan for embattled Greece seems to be gaining momentum. As noted, Germany has agreed to adhere to a similar plan that France has for helping the ailing nation. Germany, like France yesterday, said its country’s banks would be willing to roll Greece’s outstanding debt into new 30-year bonds. This proposed plan, which has been viewed positively by investors, comes ahead of a highly anticipated vote by Greece’s Parliament on whether or not to pass austerity measures that Greek leaders, the European Union, and the International Monetary Fund have agreed upon for the debt-saddled nation. The value of the euro strengthened on this news.
Meanwhile, the economic news on these shores was mixed. A half-hour after trading commenced this morning, The Conference Board, a private New York-based research group, reported that consumer confidence eased back to a reading of 58.5 in June, down both from May's upwardly revised reading of 61.7 and expectations of a reading of 60.5 for June. It was the lowest reading for this metric since last November. More significant, the report also said that consumers rated both current business conditions and labor market conditions less favorably than in May, and fewer consumers see things getting better over the next six months. On a slightly more positive note, The S&P/CaseShiller Home Price Index posted its first increase in eight months, giving a glimmer of hope that the struggling housing market is starting to bottom out, if only in rather select pockets of the country. Traders seemed to brush off the weak consumer confidence report rather quickly this morning, as it did nothing to derail the bulls.
All 12 of the major sectors finished the session firmly in positive territory, with notable advances in the energy, basic materials, capital goods, technology, consumer cyclical, and healthcare groups. Energy stocks were helped by a more-than-2% jump in both crude oil and natural gas prices. Dow 30 components Exxon Mobil (XOM - Free Exxon Mobil Stock Report) and Chevron (CVX - Free Chevron Stock Report) led a pack of energy-related stocks, including Halliburton (HAL) and Schlumberger (SLB), notably higher. Other noteworthy advancers today included Google (GOOG), OmniVision Technologies (OVTI), LinkedIn (LNKD), Nike (NKE), Monster Worldwide (MWW), and Holly Corporation (HOC). Conversely, it was a difficult day for those who held shares of AbitibiBowater (ABH), First Republic (FRC), and Agnico-Eagle Mines (AEM). Still, the number of decliners trailed advancers by a wide margin on both the Big Board and the NASDAQ.
However, the broadbased success of stocks today was not good news for the bond market. This week, more investors have abandoned their “flight-to-safety” strategy. The yield on the benchmark 10-year Treasury note and the 30-year bond, which move in the opposite direction to the price, were both higher today. Disappointing results from an auction of five-year Treasury notes earlier today also weighed on the bond market.
It was a very good day for the commodities market. As previously noted, energy futures were strong, along with the metals, agricultural, and livestock groups. The only notable decliners were lumber, orange juice, and cotton futures. The weakness of the dollar versus the euro today may have had a lot to do with the strong commodities showing—a weaker greenback makes commodities more attractively priced in overseas markets.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.