Fundamentals

U.S. Stocks Rally as Dow Returns to Positive Territory

U.S. Session Key Developments

•    Dow Jones Industrial Average Returns to Positive Territory For 2010
•    Jobless Claims Slightly Better Than Expected, Home Sales Plunge
•    Commodities Decline as Greenback Gains Against European Counterparts

U.S. stocks were generally higher for a fifth consecutive day as initial jobless claims and continuing claims were shown to be slightly lower than expected in their most recent readings.  Investors managed to shake off a 7.2 percent plunge in January home sales and pushed the Dow Jones Industrial Average back into positive territory for the 2010 year.  The employment data released by the Labor Department this morning showed that initial jobless claims fell by 29,000 to 469,000 in the week ended February 27, while continuing claims decreased to 4.5 million in the week ended February 20.  This data, coupled with a 6.9 percent improvement in nonfarm productivity in the fourth quarter, helped boost market sentiment and extend the winning streak for equities.  Commodities, on the other hand, did not fair as well due to weakness in Asia overnight and a rising U.S. dollar.  Crude oil fell nearly 1 percent today and fell below $80 a barrel intraday before closing at $80.21.  Precious metals were also weak, as gold prices fell to $1131 and silver futures fell towards the $17 level.  Silver has had a strong run as of late, gaining over 17 percent in the last month.  The U.S. Dollar Index posted its second gain of the week today, returning to the 80.5 level.  The greenback snapped its two-day losing streak against the euro, as the EURUSD fell to $1.3581 at the time of this writing.  Overall, there was very little price action after the initial morning gains as investors looked ahead to the nonfarm payrolls release tomorrow.  Economists expect the report to show that payrolls fell by 68,000 in February after declining 20,000 in the month prior.

DJIA 30                     10,444.14                      +47.38                       +0.46%
The Dow Jones Industrial Average gained back yesterday’s slight loss and some, rallying nearly 50 points on strong performances for financials and basic materials shares.  Disney was the top performer on the index, adding nearly 3 percent after analysts at Bank of America Merrill Lynch raised their rating on the stock to “buy” from “neutral.”  Shares in Bank of America rallied 1.7 percent after the U.S. Treasury sold its warrants on the company’s shares for $1.57 billion.  Other strong performers included Coca-Cola and Boeing, which each gained over 1 percent on upgrades from analysts at UBS.  Overall, shares on the index have rallied over 6 percent in the last month and have returned to the black for 2010 to date.

S&P 500                       1,122.97                           +4.18                       +0.37%
The broad-based S&P 500 rallied for a fifth day as consumer services and financials gained nearly 1 percent each.  Financials were generally higher on news of the U.S. Treasury’s sale of BofA warrants, as well as easing concern over the Volcker Rule’s potential impact on bank profits.  Goldman Sachs had a strong day, posting a 3.7 percent gain on high volume trading.  Consumer services shares were led by gains in Abercrombie & Fitch, Zumiez, and Aeropostale as year-over-year comparisons showed improvements in the retail sector.  The worst performing sector on the S&P today was energy due to falling oil prices.

NASDAQ                     2,292.31                         +11.63                     +0.51%
The tech-heavy Nasdaq was the best performer among major U.S. indices as technology stocks rose nearly 0.6 percent on the day.  Of the largest-weighted fifteen tech stocks on the index, search engine giants Yahoo!, Google, and Baidu posted the strongest gains, each adding over 1 percent.  Research in Motion was the worst performer among the largest Nasdaq tech stocks, dropping 1.2 percent.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com