Green galore in Thursday’s trade

The sun is out here in Connecticut, with flecks of green beginning to take over trees and bushes, and green is the predominant color on Bloomberg screens today as well, with the exception of bond screens, where we see a second day of modest price declines. U.S. stock prices advanced 1.4% on Thursday – at least that is what the Dow and S&P 500 indexes increased, while NASDAQ gave up some of its gain in the final minutes of trading to finish up 1.3%. The market diary for the S&P 500 shows 94% of stocks with gains, the highest win rate in a month.

A second day of declining bond yields in peripheral European markets certainly provided a friendly backdrop for U.S. shares, which built a robust rally out of modest early gains. The DJIA closed trading near its high for the day, and stock volatility measure VIX backed off 2.5 points to 17.6 after spending two days above 20. European shares also recorded big gains today, but they followed rather than preceded the U.S. market, unlike Wednesday’s action. The Dow’s 181-point advance Thursday was its best one-day increase in almost a month; the fact that it came in the same week as its worst day since Thanksgiving, Tuesday’s 214-point sell-off, is a curiosity and perhaps a suggestion that one must be prepared for market volatility in the current global environment.

CNBC also passed along a rumor that China’s Q1 GDP rose 9%, a touch better than the 8.5% growth that markets are expecting to be reported tomorrow. The half-point difference hardly seems significant – and this is merely a rumor at that – but if it materializes, it would reassure investors that China’s economy is headed for a “soft landing” rather than the hard one that some of the recent interim data were suggesting. In any event, commodities prices had a second day of increase, pretty much recovering the big Tuesday losses. Silver and copper were up more than 2% today, and 18 of 19 commodities in the CRB basket rose in price, nickel’s 0.4% decline the lone exception. The euro rallied by 0.6% against the dollar, closing at $1.3190.

Treasury bond prices fell slightly today, the 10-year T-note yield climbing two basis points to 2.06%. The Wall Street Journal’s monthly survey of economists showed a slight bump in expectations for Q1 GDP growth (to 2.2% from 2.0% expected one month ago) and progressively stronger growth in the later quarters of 2012 and in the years 2013 and 2014. The probability of recession in the next 12 months has fallen to 16% in the estimation of the 50-odd forecasters surveyed; QE3 is expected by only one in four economists for 2012; and more “can-kicking” is the majority expectation when it comes to any solution to the nation’s fiscal difficulties.

Google earnings were reported after the market’s close today, and they appeared to neither impress nor disappoint traders, who boosted the share price by a mere point or 0.1%. The company also announced a 100% stock dividend, with shareholders getting an additional non-voting share for every regular share already held. What amounts effectively to a 2 for 1 split may enhance the marketability of these $650 shares.

Reports/dates/facts/links worth paying attention to over Friday:

  1. April 13: Consumer Price Index for March; Reuters/University of Michigan’s Consumer Sentiment for April.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

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Senior Vice President – Investment Research/Economist
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