Last week, the Dow, S&P500 and Nasdaq each gained more than 5% as investors re entered the market, with expectations for better corporate earnings in the second quarter, after the two month sell-off. However, market observers are, for the most part, unclear about whether the market’s upward movement last week was just a bounce for a beaten down market or a fresh move in the upward direction. Earnings guidance provided by companies are expected to be conservative given the doubts about the strength of the economic recovery and the loss of confidence arising from the debt crisis in Europe.
Market mavens gained comfort as Greece’s budget deficit fell 46% year-over-year in the first half of 2010, partly on account of steep cuts in spending. The Greek government has set a target of reducing the general government budget deficit by 40% in the current year to 8.1% of GDP.
The market’s performance on Monday was fairly unimpressive. The Dow rose 0.2% to 10,216 led by gains among select technology shares, following upgrades for Microsoft MSFT, Yahoo YHOO, SanDisk SNDK and Qualcomm QCOM. The S&P500 and Nasdaq each gained 0.1%. The CBOE volatility index was at about 24.50 at the close on Monday. The market breadth was in negative territory while volume was on the lighter side. Gainers beat declining stocks by a margin of about 2 to 1 on the NYSE on total volume of 1.78 billion shares. Mid- and small-cap stocks declined on Monday, following their strong performance in the earlier week, partly due to downward drift in commodity stocks based on concern over Chinese demand.
Prices of BP BP gained about 8% on reports, as well as speculation, that the whole firm, or some of its assets, may be sold off. Among other stocks sharply on the move was insurance brokerage house Aon Corporation AON, which is expected to buy human resource consulting and outsourcing firm Hewitt Associates HEW for about $4.9 billion in a cash and stock deal. The transaction, expected to close by November, valued Hewitt at $50 per share, which is a 41% premium over its closing price last Friday. Shares of Hewitt gained as much as 32% while Aon fell by 7%. Weyerhaeuser WY shares leaped 8.3% as the company announced a special dividend payment of $5.6 billion. The S&P Materials index lost 1.1% after China reported, over the weekend, that its demand for copper had fallen, thereby pushing Freeport-McMoRan Copper & Gold Inc. FCX down 4.2%.
Congress is expected to resume efforts toward financial reform. Republican Senator Scott Brown indicated support for the Wall Street reform bill on Monday, thereby improving chances of its passage.
Mildly positive stock prices on Monday lowered demand for safe haven assets, such as Treasury notes. The yield on the benchmark 10-year Treasury note rose to 3.07% from 3.06% late Friday.
Zacks Investment Research© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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