The Dow ended its four-day losing streak Friday, as the stock market shook off some of its recent lackluster performance!
The Past Week: Stocks Jump, but Snap 6-Week Winning Streak!
by Ian Harvey
August 27, 2012
The stock market rallied to close near session highs Friday after Bernanke reiterated that there is further room for the central bank to act and following reports the ECB is considering setting yield band targets in a new bond- buying program.
Still, all three major indexes failed to log gains for the past week, with the Dow and S&P 500 snapping a six-week winning streak.
Early Friday, the S&P 500 briefly fell below the 1,400 level following cautious comments from German Chancellor Angela Merkel about Greece staying in the euro zone.
German Chancellor Angela Merkel said the debt-ridden nation must stick to its commitments to stay in the euro area and did not commit to granting more time for Greece to complete the required reforms to receive bailout loans.
It was the first time in two weeks that the benchmark S&P 500 had dipped below 1,400.
Shortly after this weak open, the stock market popped as traders reacted to a letter from Bernanke, obtained by the Wall Street Journal, who said there is "scope for further action" by the Fed to ease financial conditions and support the economy. The letter was in response to questions from Rep. Darrell Issa.
The Chairman's comments echoed remarks from the Fed's latest meeting minutes from earlier in the past week.
The stock market was in a good mood Friday, based on the Fed’s statements and Bernanke’s being very consistent— it seems that he’s going to do whatever it takes and will be ready to make a move possibly as early as September.
Growing doubts over whether the Fed will introduce further stimulus measures put a damper on equities in the previous sessions in the past week.
Around the same time, equities were also boosted after a report ECB is considering setting yield band targets under a new bond-buying program that could help contain borrowing costs for Greece, Spain and other euro zone countries.
However, the picture for the month is much better. The Dow is up 1.2%, while the S&P 500 has gained 2.4% and the Nasdaq up 4.5%. For the year, the Dow is up 7.7%. The S&P 500 is sporting a 12.3% gain, with the Nasdaq up 17.9%.
• The Dow Jones Industrial Average (DJI) erased 0.88 percent for the week, to close at 13,157.97.
The Dow's gain was its largest since Aug. 3, when it jumped 217 points.
The Dow ended the week less than 1% below its 2012 closing high of 13,279, set on May 1.
• The Standard & Poor's 500 Index (SPX) lost 0.50 percent, to end at 1,411.13.
The gains for the S&P 500 were their best since Aug. 16.
The S&P 500 is about 0.5% below its 2012 closing high of 1,419.04, set on April 2.
• The Nasdaq Composite Index (COMP) slipped 0.22 percent, to finish at 3,069.79.
The gains for the S&P 500 and Nasdaq were their best since Aug. 16.
The Nasdaq is 1.7% under its 2012 high of 3,122.57, set on March 26. • The Nasdaq-100 Index (NDX), which tracks the largest Nasdaq stocks, gained 16 points to 2,778.
The gain came despite Apple (AAPL), the largest influence on the index. The stock saw a gain of nearly $7 Friday morning slip to 59 cents at $663.22
The CBOE Market Volatility Index (VIX), widely considered the best gauge of fear in the stock market, ended its four-day win streak Friday, and fell 4.9% to close at its intraday low. However, the stock market's fear gauge notched a weekly return of more than 12.8%.
Trading volume was extremely light for the past week due to the summer holiday season and ahead of the Fed's symposium at Jackson Hole, Wyoming, where Bernanke and ECB President Mario Draghi are expected to speak.
Volume, on Friday, was the second lowest for a full day this year, with 4.6 billion shares trading on the New York Stock Exchange, the Nasdaq and the Amex. The year-to-date average is 6.6 billion.
TOP OPTIONS TRADES SINCE JUNE 01, 2012
|HLF July 47.50 Calls||53%||APPL Aug 650 Calls||67%|
|DLTR Aug 110 Calls||32%||UIS Oct 17 Calls||79%|
|HSY Aug 70 Calls||56%||TSO Nov 25 Calls||54%|
|NKE Oct 92.50 Calls||49%||HLF July 47.50 Calls (again)||38%|
|FB Aug 25.00 Puts||500%||DISH Sept 30.00 Calls||100%|
|APPL Jan 13 650.00 Calls||71%||CSTR Oct 42.50 Puts||400%|
|LNKD Aug 92.50 Puts||30%||LNKD Aug 100.00 Calls||250%|
|SLV Nov 30.00 Calls||114%|
The 10-year Treasury yield rose to 1.678% from Thursday's 1.666%.
The dollar was higher against major currencies.
Crude oil was higher for much of Friday on hopes for Fed stimulus and worries about the Middle East, but late selling pushed the price slower, settling at $96.15 a barrel, down 12 cents. Brent crude was off $1.79 to $113.22 a barrel.
The national average price of gasoline, however, was up slightly to $3.73 from $3.718 on Thursday.
Gold settled down all of 20 cents to $1,672.90 an ounce.
Silver was up 16.5 cents to $30.621 an ounce.
Copper settled off 0.9 cents to $3.4835 a pound.
Company News and Earnings in the Past Week
• Among earnings, Autodesk (ADSK) plunged after the design-software maker's results missed estimates and handed in current-quarter profit and sales forecasts that disappointed analysts. At least four brokerages lowered their price targets on the firm.
• Amazon.com (AMZN) was up $4.54 to $245.74 on speculation it will introduce a new version of its Kindle Fire tablet on Sept. 6.
• Eli Lilly (LLY) said solanezumab, a highly anticipated potential treatment for Alzheimer's disease, failed to reach its set goals in either of two Phase 3 studies. But shares were up $1.46 to $43.86 after pooled data from both studies showed signs of the drug slowing cognitive decline overall in patients with mild-to-moderate cases.
• Salesforce.com (CRM) rose $1.77 to $148.54. Fiscal-second-quarter earnings topped analyst estimates, but its outlooks for the third quarter and full year were below estimates.
• Aruba Networks (ARUN) surged $2.44 to $19.36 after the mobile network company reported fiscal-fourth-quarter earnings and revenue that beat estimates.
• Also on the tech front, a Seoul court ruled that Samsung's Galaxy smartphone looks very similar to Apple's (AAPL) iPhone, but the company has not violated the iPhone design.
• Among gaining stocks, Supervalu (SVU) shares jumped 10.9 percent to $2.35 as the U.S. grocery company's advisers sought potential buyers to bid for the entire business, even as several suitors have inquired about its individual parts, according to a Bloomberg report.
Economic News in the Past Week
On the data front, new orders for durable goods, which are long-lasting U.S., manufactured goods such as computers and aircraft, surged in July, even as declines in a gauge of planned business spending pointed to a slowing growth trend in manufacturing.
The mixed data added to the stock market's uncertainty on whether the Federal Reserve will act soon to bolster the economy.
The Major ETFs in the Past Week
The stock markets lost ground in the past week, but managed to claw back some of the losses on Friday, August 24.
While the week was still down overall, the index ETFs remain very close to 52-week highs and two of the ETFs actually made new 52-week highs this week. That is a positive sign, but as mentioned in prior market summaries, this is a critical juncture for stocks. Declining volume warns the rally may be running out of steam, but price - the ultimate indicator - continues to move higher. Using another indicator, the true strength index, you are able to isolate potential turning points quite early, and keep yourself in the trend if the price continues to rally.
1. The Economy and Earnings in the Week Ahead – August 27, 2012
2. The Week Ahead in the Stock Market – August 27, 2012
3. The Major ETFs in the Week Ahead – August 27, 2012
4. Stock Market Monday and Underperformance, August 27, 2012
5. Hedge Fund Managers Becoming More Bullish, August 27, 2012
6. New Range Options from CBOE , August 27, 2012