New York, October 6th (TradersHuddle.com) – Stocks jumped, logging a 3-session rally led by financials and economic sensitive stocks. The Dow finished above 11,000 following encouraging data in the U.S. and after the ECB announced new liquidity measures to aid banks in the region and the President of the EU commission said that policymakers were discussing coordinated action to recapitalize banks.
The Dow Jones Industrial Average jumped 183.38 points, or 1.68%. The S&P 500 index gained 20.94 points, or 1.83%, while the NASDAQ rallied 46.31 points, or 1.88%.
The market started around the unchanged mark and quickly moved to the downside at the start of trade after what it was a volatile morning, with futures showing a strong bid early in the morning following weekly jobless claims data and strong overseas action in reaction to additional comments over a plan to recapitalize European banks, but futures gave those gains after the ECB left rates unchanged. National retailers had been reporting their September sales, with the majority of the reports coming better than expected.
But the majority of the headlines were coming from the news that Steve Jobs, Apple’s visionary leader, passed away yesterday. The news generated an outpouring of tributes from political, business, technology leaders, and regular folks, as he through his work touched and transformed all of our lives. Shares of Apple (NASDAQ:AAPL) started the session modestly lower, trading as low as $372.58.
In Europe markets closed sharply higher, closing at their highest level in 5 weeks, as miners received strong bids following news that the Bank of England announced new stimulus measures. Banks were also among the leaders on hopes the policymakers will be able to find a way to recapitalize them. Participants shrugged off the ECB holding rates steady and focus on a new liquidity measure aimed to aid in bank funding.
The market erased earlier losses and moved into higher territory as European market closed and more chatter emerged from Europe regarding plans to recapitalized troubled banks. The improved picture in weekly jobless claims and the positive ADP report also provided confidence for participants to add to positions ahead of tomorrow’s key jobs report.
All of the S&P 500 sectors closed in positive territory, with financials, materials, consumer discretionary, and industrials posting the biggest gains. Defensive plays like consumer staples and healthcare were lagging. Technology slightly underperformed the broad market index, partly as Apple shares didn’t participate in the rally, as it had a subdued price action given the sad news.
Apple (NASDAQ:AAPL) was falling 0.23% to $377.37 after actually turning positive for some time in the morning trading. The stock held well amid the news of Steve Jobs losing his long fight against cancer. Participants remembered mr. Jobs as a visionary, a rebel, a master innovator, an inspiration to many, and as a leader that will be hard to replace; however on the other hand they seem to focus that the company he helped build has a deep bench, with a strong management team, a robust product pipeline and plenty of cash and brand power to succeed in the years ahead. The latest innovation the iPhone 4S received a flat response when it was unveiled yesterday, however analysts believe that the strong ecosystem as well as the upgrades the device has internally will continue to drive sales for the tech giant. There were no analyst rating changes for the stock, only research notes citing the long term plans, product portfolio, and the management team, with analysts expressing confidence in Tim Cook and its ability to manage Apple in the post Steve Jobs era.
Financials rallied more than 3% for the session, thanks to big gains in bank stocks. in addition to Europe policymakers taking a banking crisis of the table, given the talk of banks getting additional capital, the market in the U.S. reacted favorably and bid the embattled sector. Comments from Timothy Geithner, U.S. Treasury Secretary, provided an additional boost in confidence, as he said that there is no risk of any U.S. major bank failing due to its exposure to European debt, as they are stronger than in 2008.
Bank of America (NYSE:BAC), the largest U.S. lender and a proxy for the U.S. consumer, surged 8.84% to $6.28, posting the biggest gain in the blue chip index. The stock extended its rebound from its multiyear low of $5.13 posted on Tuesday, in 3 days, the Charlotte, NC based bank has jumped 9.6%.
Rival Citigroup (NYSE:C), the third largest U.S. lender, jumped 5.3% to $26.02, extending its rally from its multiyear low of $21.40. Citi shares have surged 21.5% since hitting the low on Tuesday this week.
Regional banks were also top performers in the sector and the broad market index. Regions Financial (NYSE:RF), the Alabama based regional bank, rallied 9.91% to $3.66, logging one of the top gains in the S&P 500 index, but closing below calculated resistance at $3.76.
Providing additional support to banks and also homebuilders were news that 30-year mortgage rates fell for the first time ever below 4%, providing more incentives for U.S. households to refinance or providing help for potential buyers to qualify for mortgages. PulteGroup (NYSE:PHM), the Michigan based homebuilder, gained 2.8% to $4.03, extending its surge from the yearly low of $3.29 logged on Tuesday. The homebuilder was among the outperformers of the consumer discretionary sector.
Wynn Resorts (NASDAQ:WYNN), the operator of luxury casinos, was the top performing stock in the sector. Shares of Wynn resorts rallied 10.54% to $132.58. The stock has surged 21% from the lowest level it traded earlier in the week. The stock had been under pressure from concerns over economic growth, especially in China amid signal of tighter credit in China. Tuesday’s gaming data from Macau dispel fears of big drops in gambling revenue at the Asian gambling capital, which together with fears of an economic calamity easing has provided the fuel for the rebound. Last quartet, the company generated about ¾ of its revenue and EBITDA from its operations in Macau.
Retailers also saw increased interest amid mostly positive sales reports. Coach (NYSE:COH), the leading American designer and maker of luxury lifestyle handbags and accessories, was among the top performers in the space, with shares jumping 6.63% to $56.78. Coach has calculated support at $48.37 and resistance at $60.90.
Meanwhile, lagging in the sector were shares of TJX Companies (NYSE:TJX), the owner and operator of T.J. Maxx and Marshalls chains, fell 1.4% to $55.60 after the company reported September same store sales increased by 4% versus consensus of $2.9%, while saying that it sees its third quarter EPS in a range of $1.03-1.07 versus consensus of $1.07.
Materials saw a strong bid, as the underlying commodities were moving higher as concerns over faltering demand that have hit them in the last sessions eased. Alcoa (NYSE:AA) jumped 5.44% to $9.88, posting the second biggest percentage gain in the Dow Jones Industrial Average, as the euro strengthened on talk of bank recapitalization plans, providing an additional lift to metal prices. Alcoa is schedule to report its earnings ahead of the opening bell next October 11th, with analysts on average expecting a profit of $0.26 per share on revenue of $6.31 billion.
Monsanto (NYSE:MON), the agricultural business company, jumped 7.61% to $71.29, closing above calculated resistance at $67.35. The stock was upgraded to Overweight from Neutral at JP Morgan and yesterday the company posted better than expected top and bottom line results, while providing current quarter EPS guidance above consensus and in line EPS for fiscal 2012.
And in tech, Corning (NYSE:GLW), the LCD and optical fiber maker, rallied 7.14% to $13.50, closing above calculated resistance at $13.16 and logging one of the best performances in the sector. The company announced a 50% increase to its quarterly dividend to $0.075 per share, while also announcing a $1.5 billion buyback program. Morgan Stanley also initiated coverage in the stock with an Equal Weight.
Meanwhile, Sprint Nextel (NYSE:S), the 3rd largest U.S. wireless provider, jumped 5.24% to $3.01. The stock had been under pressure earlier in the week on concern over the pressure in margins and the amount of its commitment made to Apple in order to be able to carry the new iPhone 4S. Sprint has rallied close to 34% from its multiyear low of $2.25, logged last Tuesday.