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Wednesday, February 2, 2011

Dow, S&P end at highest since June 2008


The Dow and S&P 500 closed at their highest levels since June 2008 on Tuesday and looked poised for more gains after strong earnings and signs of a surge in U.S. manufacturing.
Data showing improved factory activity and strong results from shipping company UPS Inc, seen as a gauge for economic activity, bolstered the growing impression among investors that a recovery was broadening.
The rising sentiment drew in additional buyers on a well-traded day as fears that Egypt 's turmoil could spread elsewhere lessened.
Volume was above last's years daily average with 8.71 billion shares traded on the NYSE , Amex, and Nasdaq amid reports of some large scale buying from institutional investors.
The Dow closed above the psychologically important 12,000 level for the first time since June 2008.
Scott Marcouiller, chief technical market strategist at Wells Fargo Advisors in St. Louis, said the biggest pullback in six months on Friday had lured investors. "There was an opportunity for that money that had missed out to jump in," he said.
The Dow Jones industrial average gained 148.23 points, or 1.25 percent, to 12,040.16. The Standard & Poor's 500 Index rose 21.45 points, or 1.67 percent, to 1,307.57. The Nasdaq Composite Index added 51.11 points, or 1.89 percent, to 2,751.19.
The S&P 500 closed above 1,300 for the first time since August 2008.
"Risk is coming back into the market," said David Lutz, managing director of trading, Stifel Nicolaus Capital Markets, Baltimore. "A lot of it is block volume which suggests it's institutional."
Pfizer Inc shares rose 5.5 percent to $19.22 after the Dow component's income and revenue topped estimates. The drugmaker also announced a new share-repurchase program of up to $5 billion of its common stock.
United Parcel Service Inc rose 4.1 percent to $74.59 after profit at the world's largest package deliverer beat estimates and it forecast record-high earnings in 2011.
Signaling improvement in economic growth, the U.S. manufacturing sector expanded at its fastest pace in nearly seven years in January, according to the Institute for Supply Management. The index's employment component rose to is highest since 1973.
That chimed with other manufacturing reports released around the world on Tuesday.
"Manufacturing seems to clearly be an area of strength, and it is the combination of manufacturing picking up and the consumer picking up, that's most of the economy." said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
The euro hit a 2-1/2 month high above $1.38, boosted by the solid global manufacturing data, as easing concerns about the euro-zone's public debt also helped the broad equity rally.
Investors were less jittery about Egypt .
President Hosni Mubarak, responding to huge popular protests demanding the end of his 30-year rule, said he would not seek re-election in a ballot scheduled for September .
The CBOE Volatility Index, Wall Street's fear gauge, fell nearly 10 percent, its biggest drop in over two months
Advancing stocks beating declining ones by a ratio of nearly 5 to 1 on the New York Stock Exchange .
NYMEX oil futures , which had risen in the past couple of days, fell 0.7 percent to $90.77 a barrel.
U.S. investors also continued to search for Egyptian markets exposure. The Van Eck Market Vectors Egypt Index exchange-trade fund was up 5.8 percent after a 7.9 percent jump Monday. The ETF is one of the main instruments for U.S. investors seeking exposure to Egyptian markets.
Supporting the Nasdaq , Baidu shares gained 9.3 percent to $118.73 after the company beat fourth-quarter estimates and painted a bright near-term outlook.
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China to raise interest rates within month


China will likely raise interest rates again within the month, the New York Times reported on Wednesday, citing a forecast of economists and bankers with knowledge of the thinking of Chinese policymakers.
The Hong Kong-datelined story did not identify its sources, citing the sensitivity of the information.
It also cited the economists and bankers as saying China was unlikely to let the yuan currency appreciate faster anytime soon as a way to fight inflation.
Analysts polled by Reuters saw two more rate rises by the end of the first half.
The median forecast of economists polled by Reuters is for inflation to reach its fastest in more than two years at an annual pace of 5.3 percent for January.
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Equity funds record worst monthly fall in 2 yrs


Diversified stock funds mirrored losses in benchmark index in January with unit values recording their worst monthly performance since October 2008, data from global fund tracker Lipper showed.
Such funds, which form the largest category of equity schemes by number and assets, posted an average drop of 9.8% in the month, compared with a 10.6% fall in the 30-share benchmark Sensex.
"Mid & small cap funds and infrastructure themed funds were the biggest losers during the month, with these two segments losing investor appeal in January," said Dhruva Raj Chatterji, senior research analyst at Morningstar India.
High inflation and fears of further rate hikes dented investor sentiment and led to a sharp fall in key stock indices, as foreign funds pulled out $1.4 billion from Indian equities in January.
Higher exposure to small and mid-cap counters also affected unit values, as diversified equity funds had more than a third of their assets invested in such companies as of December-end, Morningstar India data showed.
Shares of such firms fell more than their larger peers in January, with the BSE mid-cap index losing 12%, and the small-cap index recording a drop of 12.3% during the month.
Exposure to sectors like financials and energy, which together accounted for more than 30% of diversified equity fund assets, also hurt funds performance, data showed.
The country's top lenders SBI and ICICI beat estimates in third quarter results, but rising rates in India are likely to dampen the outlook for earnings growth in the near term.
The BSE Banking index fell 9.8% in January, while the oil & gas index dropped 10.6%.
"It has been a broad-based fall in markets which has affected funds," said R K Gupta, managing director of Taurus Mutual Fund. "This is a catch-22 situation for the fund managers."
BOND, GOLD FUNDS
Indian fixed income funds investing in government debt saw net values rise 0.16% in January, as yields eased after the central bank's policy review in the last week of the month.
"Policy was not as hawkish as some people were expecting, so the bond yields fell... that led to the positive return," said Mahendra Jajoo, head of fixed income, Primerica Asset management.
The Reserve Bank matched expectations with a 25 basis-point rise in rates on Jan. 25, rather than the 50 basis-point increase some investors had expected.
For the month, the yield on the actively traded 8.13%, 2022 bond rose 14 basis points in the month while the less liquid benchmark 10-year bond yield was up 23 basis points.
India's gold exchange-traded funds (ETFs) fell 3% in the month as yellow metal prices fell on waning safe-haven appeal due to improvement in US data.
On the continuous charts, gold futures ended January at 19,922 rupees per 10 grams, down 3.9% for the month.
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India to see inflation fluctuations in coming months


 India is likely to see inflationary fluctuations in the next three months or so, but the overall trend for prices is to moderate, Finance Minister Pranab Mukherjee said on Wednesday.
India is currently battling soaring price rises, causing a major headache for the ruling government, but policymakers have cautioned against panic reaction.
Headline inflation moved up to 8.43 percent in December from a year ago on higher food prices, and the overall prices are widely seen remaining firm on higher food and global oil prices.
Oil continued to climb on Wednesday on worries that unrest in Egypt would trigger regime change across the Middle East and North Africa, driving North Sea Brent crude futures towards a 28-month high.
"There have been fluctuations, monthly or weekly, during the last nine months. Inflationary pressures have seen fluctuations. In the large economy of India, these type of periodical fluctuations are not unheard of," Mukherjee told reporters.
"In the remaining three months or so, there may be some fluctuations...but the basic fundamentals of the economy are strong."
Under pressure over its inability to stem soaring food prices for much of the past year, the government has missed many of its own projections on inflation and Mukherjee's statement may be a way of tempering expectations of a swift drop in prices.
High prices have prompted the central bank to raise its key rates seven times since March and revise upwards its forecast for inflation for the end of the year to 7 percent.
Mukherjee said stock markets have seen volatility in the past few days due to selling pressures from foreign institutional investors but the government still expects 8.5 percent economic growth in the current financial year ending March.
"Manufacturing activity is on a strong growth path, in spite of the monthly fluctuations in the Index of Industrial Production witnessed in recent months," he said.
Mukherjee also said India would end the fiscal year with a "better-than-projected fiscal balance", which would be lower than the government's earlier projection of a fiscal deficit of 5.5 percent of GDP.
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Maruti Suzuki launches premium sedan Kizashi


Car market leader Maruti Suzuki Wednesday launched its premium luxury sedan Kizashi priced between Rs.16.50 lakh to Rs.17.50 lakh ex-showroom Delhi.
'With the launch of this luxurious sporty sedan, Maruti Suzuki is able to offer an international car to top-end customers in India,' said Shinzo Nakanishi, managing director and chief executive of Maruti Suzuki India.
According to him, the launch of the high-end sedan was important for the company to have such a product in its portfolio.
The car, which would be brought in the country in a complete-build unit (CBU), would be available in two variants of conventional manual gear and automatic transmission gear system.
'The car would be imported as CBU from the Suzuki's Sagara plant in Japan. It was first launched in late 2009 there (Japan) and later in the US,' said a company official.
Kizashi, which in Japanese means 'a sign of good things to come', is powered by a four-cylinder 2.4-litre petrol engine which churns out 2,400 cc of power and gives a mileage of 12.53 km per litre.
Other features include keyless push start, sporty meter cluster, electronic stability programme, 17-inch aluminium alloy wheels and suspension system which was customised for the Indian conditions.
The car would compete with the base models of Honda Accord and Toyota Camry and high-end models of Honda Civic and Volkswagen Jetta.
The company said the booking of the car has been opened with an amount of Rs.50,000, while the first deliveries would begin in March 2011.
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