Wall Street opened higher following reassuring comments from Federal Reserve Chairman Ben Bernanke last night.
Investors concerned about the global economic outlook heaved a major sigh of relief last night after the Federal Reserve Chairman Ben Bernanke said the US economy is unlikely to slip back into recession. The comments helped settle markets globally and saw US equities rise on the open today.
When asked the key question of whether the US economy has gained enough strength to sustain a recovery without government intervention, the Chairman responded that 'so far the news is pretty good'. He pointed to consumers coming back, firms spending more and the private sector 'picking up the baton and moving the economy forward'.
As a matter of fact, a Bloomberg report indicated that the US may be faring quite well compared to its global counterparts. The survey, which took results from a random sample of 1001 subscribers, showed 39% of respondents thought the US offered the best opportunities over the next year, followed by emerging market powerhouses Brazil (29%), China (28%) and India (27%). While 42% of respondents indicated they thought the global economy was deteriorating, 57% thought the economy was either stable or improving.
Meanwhile, a separate survey conducted by the National Federation of Independent Business showed a revival in US private sector optimism. In April the index for business optimism rose from 90.6 to 92.2, the highest level in 20 months. The survey indicated that small businesses are ready to step up hiring and expect to build up their inventories in anticipation of heightened demand over the next six months. Small business is the lifeblood of any economy, and according to the US Small Business Administration, they were responsible for creating 64% of all new US jobs over the past 15 years.
In contrast, a similar survey conducted by the Investor’s Business Daily/TechnoMetrica Institute of Policy and Politics (IBS/TIPP) showed that US consumer confidence had become more pessimistic. The index dropped 2.5 points to 46.2. Anything below 50 is considered pessimistic. The report showed that the key concern for consumers was unemployment, with 52% of households indicating they were job sensitive and 41% concerned that a member of their household may lose their job over the next twelve months.
By 3.45pm (London time) the Dow Jones was trading 40.13 points (-0.41%) lower at 9776.36, the S+P 500 Index had lost 5.76 points (-0.55%) to 1044.71, while the tech-heavy NASDAQ 100 was 20.56 points (-1.16%) lower than its previous close at 1777.60.
Banking stocks rose today, despite financial reforms being pushed ahead in the US Senate. The banks may have found some reassurance following announcements from Europe’s finance ministers, who said the details of the euro rescue fund are near completion. The European Financial Stability Facility will be backed by €440 billion in national guaranteed bonds that will be sold as required in order to raise funds to assist embattled eurozone countries.
US banks, especially those that have an exposure to European debt, reacted positively to this news, with sector gains ranging between 1% and 2% this afternoon. Goldman Sachs was the only major bank to stumble, losing 1.06% to $137.21 following the Federal Crisis Inquiry Commission’s (FCIC) decision to slap the bank with a subpoena for withholding certain information.
Other stocks on the rise included Dollar General Corp, which rose 1.23% to $29.59, after the discount retailer raised its profit forecast for the year to $1.69 per share, topping Bloomberg’s median analyst estimate of $1.63. Corning also advanced 3% to $16.48 after Sanford C. Bernstein & Co upgraded the company from 'market perform' to 'outperform'.
Tech stocks were weaker today, with Intel and Microsoft the biggest fallers on the Dow Jones Industrial Average, losing 1.86% and 1.62% respectively. Meanwhile, NVIDIA and Citrix were some of the heaviest casualties on the S&P 500, with the former shedding 3.93% and latter retreating 3.75%.
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'Spread Betting News 8 Jun 2010', Article by IG Index, last update: 8-Jun-10
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