Tag Archives: Index

S&P 500 Advances Most This Year on Retail Sales

The Standard & Poor 500 Index has recorded its biggest gain of the year on rising U.S. stocks amidst better-than-expected retail sales and a corporate merger that boosted confidence in U.S. economy.

Technology companies were lead in gains by Inter Corp. and Jabil Circuit Inc. with rises of at lease 4 percent as analysts posted upgrades. Google (GOOG) Inc. advanced 2.4 percent following its purchase agreement for thermostat maker Nest Labs Inc. for $3.2 billion in cash. Time Warner Inc. refused an acquisition offer from Charter Communications Inc. and added 2.7 percent. JPMorgan Chase & Co. and Wells Fargo remained at their previous levels following fourth-quarter reports.

The S&P 500 (SPX) climbed 1.1 percent, its biggest increase since 18th December and one that erased nearly all of yesterday’s loss. The Dow Jones Industrial Average advanced 115.92 points, or 0.7 percent. In terms of share numbers, about 6.5 billion of them were bought and sold on U.S. market yesterday, moving at 7.7 percent above the 30-day average.

Yesterday, the S&P lost 1.3 percent, the greatest amount since November, as investors reconsidered their valuations following the record levels the index reached last year on a 30 percent valuation. The benchmark index lost 1.6 percent from the start of the year through yesterday, making this its worst beginning to a year since 2009.

Indices Hit Record Highs on Soaring Stocks

Benchmark indices hit record highs as stocks rallied yesterday, while Treasuries slipped, after the Federal Reserved announced it had gained sufficient confidence in the job market to begin tapering, promising to keep interest rates low. Both the U.S. dollar and commodities gained on the market.

The Standard & Poor’s 500 Index (SPX) climbed 1.7 percent, its biggest advance in 8 weeks, and the Dow Jones Average (INDU) surged 292.71 points. The U.S. equity volatility benchmark gauge lost the most since October. The dollar skyrocketed to a five-year high against the yen and gained against most of its major peers.

Equities have been taking hits on all sides since May, when Bernanke announce that a tapering programmed would likely start this year. The S&P 500 plunged 5.8 percent in the period from 21st May through 24th June. After the Fed shocked the markets with its decision not to taper in September, the index regained lost points and set new highs.

The index had lost 1.5 percent from its last record reached on 9th December, on the speculation that improving U.S. economic data would prove sufficient for tapering to begin. The S&P has climbed a total of 27 percent this year, the mist since a 1997 surge of 31 percent.

Investors Wage Mammoth Trades on VIX and SPX

The Chicago Board Options Exchange Volatility Index (VIX) has just received a $13 million investment from a single investor in call options forecasting that the gauge will jump 88 percent by the first quarter next year.

According to Trade Alert LLC, an unnamed investor bought approximately 100,000 VIX March calls, placing the contracts on the top-five list of most-traded U.S. options exchanges.

But the VIX is not the only index to draw big money these days. A different investor has put $5.1 million on the line anticipating an increase in the Standard & Poor’s 500 Index (SPX) greater than 10 percent in the coming three months. Trade Alert reports that this trade comprises about 31,000 calls with a February expiry bought at around $1.65 per contract and bearing an exercise price of 1,975 on the U.S. equity benchmark.

Besides the astronomical amounts invested in them, the trades have also piqued the market’s interest on account of their different perspectives: the VIX trade hinges on the emergence of a highly volatile market, while the SPX trade needs significant gains in the equity market. Both trades, moreover, defy the popular prospect of a continued U.S. monetary stimulus following a bull market of four years.

Euro Stoxx 600 Trims Four-Week Gain

European stocks declines halting the four-week gain of the Stoxx Europe 600 Index, due to investors’ expectation that U.S. manufacturing growth slowed.

The Stoxx 600 fell 0.2 percent to 321.7 at 10:54 a.m. in London. The gauge has gained 0.5 percent this week, as it closed at its highest level yesterday level since May 2008, as the Federal Reserve refrained from curbing stimulus measures and as companies from BNP Paribas SA to Volkswagen AG reported better-than-forecast profit.

The release of the Supply Management’s manufacturing index recorded a decrease yesterday to 55 for last month from September’s 56.2, which was the strongest since April 2011. Investors eagerly awake data next week to gauge the health of the U.S. economy following the announcement of the Federal Reserve this more evidence of sustained growth is needed before restricting the amount of its monthly bond purchasing.

Euro Stoxx 50 Rises as Draghi Boosts Confidence

The European region is currently enjoying its fastest growing rate since 2002 as virtually all stocks are seen rising in the Europe’s biggest rally in 19 months.

After reaching its 2013 low in June, the Euro Stoxx 50 Index (SX5E) has risen 21 percent with only thee stocks not showing increase. Companies across the board are recording gains with expanding prospects as the longest-ever European recession comes to an end. The pledge of European Central Bank’s President Mario Draghi to protect the euro as recovery takes hold has further boosted investors’ confidence in the economy of the region.

The Euro Stoxx 50 increased 0.7 percent to 3,038.96 yesterday, closing at 2 1/2-year high and a 15 percent overall improvement for 2013. The measure has taken its worse hit of 35 percent between February and September 2011 as the debt crisis that forced five countries to accept a bailout worsened.

Curb Your Enthusiasm, Say Analysts

The Dow and S&P 500 continued their high runs for the sixth consecutive week and were up by 2 per cent by the end of the week, but the continued stock rally in the US and Japan is not necessarily cause for optimism, some analysts say.

These analysts take the rally-induced enthusiasm with a pinch of salt. For instance, CNBC’s Marc Faber pointed out that what we are seeing now in terms of investor behaviour was exactly what we saw four years ago when such short-lived enthusiasm ended badly.

“We’re up very substantially, I think investors who today rush into stocks should be reminded of that,” Faber observed. He said that the current rally will end in “a 20 per cent correction or a more nasty sell off at some point this year.”

While some express caution, the S&P 500 is nearing its all-time highs and the Nasdaq hiked up by 0.4 per cent, both driven by robust jobs data which inspired many investors to express faith in the economy’s ability to bounce back.

Positive Sentiment Drives Stocks in Europe

European stocks were reaching the skies for a ninth successive month on Thursday following Ben Bernanke’s, head of the U.S. Federal Reserve, and Mario Draghi’s, head of the European Central Bank, stern arguments for looser monetary policies on both sides of the Atlantic.

The Stoxx Europe 600 index rose half a point to 288.65, jumping 0.9 per cent compared to a day earlier. The wider optimistic trading disposition arose after Bernanke, following his additional day of congressional statements on Wednesday, repeated the argument that the Fed’s super-slack monetary-easing policy is required to upkeep the economy.

In other European news, Germany’s DAX 30 index increased 0.8 per cent to 7,734.56, with shares of Bayer AG climbing 2.6%. In the U.K, the FTSE 100 index picked up 0.3 per cent and managed climbed to 6,344.18.

The Big Mac Variable

McDonald’s, the company whose symbol is more popular the cross of Christianity, has a product which is probably the most well-known burger in the world, namely the Big Mac. The company’s flagship burger has also become a measurement tool for economists who use the price changes of the Big Mac to determine various economic aspects of a country’s financial health.

Source: Bruegel computation based on data compiled by the Economist.

Now one European think-tank and its innovative researchers have taken the Big Mac Index and morphed it into a variable which seems to suggest that countries undergoing severe austerity measures outperform on average countries with slacker economic policies. However, according to the researchers, Italy is the sole exception to the rule.

The Big Mac index was developed by The Economist in 1986 as a happy-go-lucky manual to whether currencies are at their “accurate” level. The index is centered around the idea of purchasing-power parity (PPP) determining that in the long run exchange rates should move towards the rate that would equalise the prices of an indistinguishable basket of goods and services (Big Mac) in any two countries. For instance, the average price of a Big Mac in America at the start of 2013 was $4.37. In China it was only $2.57 at market exchange rates which meant that the “raw” Big Mac index claimed that the Yuan was unappreciated by 41 percent at that time.

According to the kids at Bruegel and their Big Mac Standard, austerity-embracing Austria and Germany grow above average, while the spend-to-recover countries such as Greece, Ireland, Portugal and Spain are below average. Austerity-driven policies seem to be working not just for unit labour costs but even real prices are adjusting:

Source: http://www.bruegel.org/nc/blog/detail/article/1005-what-does-the-big-mac-say-about-euro-area-adjustment/

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