Stocks went up on Friday with the S&P closing the session at a 2-year High as the investors welcomed the economic news that was upbeat alongside the dividend hike by General Electric.
The Dow Jones Industrial Average added 0.3% or 40 points to close at 11,406 with General Electric being the highest gainer with an increase of 3.4% after it announced a quarterly dividend increase of 17% to 14 cents per share.
The S&P 500 increased 0.6% or 7 points to end at 1,240 after it broke through the key technical level. This marked the highest point since September 2008.
The NASDAQ went up 21 points or 0.8% to settle at 2,637, its highest level since December 2007.
For a week, the Dow had gained 0.4%.The S&P added 1.3% and the Nasdaq increased 1.5% in the last five days.
The increase came after the government’s reports indicated that the US trade deficit has unexpectedly gone down in October making investors optimistic about the economic growth early the next year. A separate report also indicated that the consumer sentiment has one up.
Dan Greenhaus a chief strategist at Miller, Taback & Co. stated that the trade data got many investors off guard, suggesting that the fourth quarter GDP might be much better than expected. He was also quick to add that the news out of China was the bigger story.
The People’s Bank of China raised its reserve requirement ratio for banks as a way of decreasing inflation and avoiding an economic crash landing. This move raised speculation that the central bank could raise its interest rates next year.
Greenhaus added that although the moves were necessary, China is going towards tightening and it needs to slow things down.
A separate report indicated that China’s trade surplus went down 16% as the export increased 35% from the prior month.
Earlier in the week, the investors welcomed the news that Washington was close to reaching a deal that would see the extension of the Bush-era tax cuts for two years. On Thursday,
the House Democrats voted against the tax package, which also included the extension of the unemployment benefits as well as a break in the payroll taxes.
According to Greenhaus, the final outcome of the tax debate is still a major source of uncertainty in the market.
The stocks ended mixed on Thursday, as the strong dollar weighed on the companies that deal in commodities while the tech and financial shares firmed.
The Investors are expecting the upward trend of the market to continue.
Chip Brian, chief executive of MySmarttrend.com, which analyzes more than 6000 stocks in real time, confirmed that the market will continue moving sideways to upwards saying that it is good.
The week will come with a number of reports including the reports on retail sales, new home construction as well as the consumer prices. The Federal Reserve is also scheduled to release a policy statement on Tuesday. The investors will also check on the Chinese inflation report that is due over the weekend.
Economy
The US trade balance, a measure of the difference between the nation’s imports and exports, reduced to $38.7 billion in October, a drop of 13% from the $44.6 billion recorded in September according to the report from the Commerce Department. The Economists were expecting a $44.5 billion deficit.
The decline marked a 9-month low in the US deficit as the exports went up 3.2% to $158.7 billion the highest since august 2008 and the imports lost 0.5% to $197.4 billion.
The University of Michigan/Reuters index of consumer confidence for early December went up to 74.2 from 71.6 last month. The economists had expected an increase to 72.5, according to the consensus estimated from Briefing.com.
World Markets
Asian Markets closed mixed with the Shanghai Composite adding 1.1%. The hang Seng in Hong Kong lost less that 0.1% while Japan’s Nikkei slipped 0.7%.
The trade Surplus of China dropped to $22.9 billion in November, marking a decrease of 16% over the $27.2 billion in October. The Exports went up 34.9% in November, marking an increase of $17.3 billion from the previous month according to China’s General Administration of Customs.
In the meantime, the People’s Bank of China announced that it will increase the bank reserve requirement ration by one-half percentage points as per the 20th of December. According to Xinhua, the banks will now have to put aside 18.5% of their reserve. This marks the sixth of such hikes as China is attempting to control the runway lending amid the increasing inflation.
European stocks also ended mixed with the DAX in Germany increasing 0.5%. France’s CAC 40 and Britain’s FTSE 100 ended flat.
Companies
GE announced its plan to pay dividends for the fourth quarter worth 14 cents per share up from 12 cents. It also announced its expectations to repurchase opportunistic shares next year.
GE Chief executive, Jeff Immelt, said in a statement that GE is able to increase the dividends for the second time in the year because of the continuous cash generation, solid underlying performance in its industrial business as well as the accelerated recover in its capital.
Community health Systems announced that it had made an offer to acquire Tenet healthcare for $6 per share, a premium that is more than 40% of the closing price of Tenet. This was a second attempt as its initial offer was rejected. The shares of Community Health went up 13% while those of Tenet Healthcare increased 55%.
Green Mountain Coffee announced the net income of $27 million for the fourth quarter or 20 cents per share in line with the expectations. It shares dropped 10% as the investors reacted to the outlook of the company and the decision not to provide the specific guidance over its K-Cup sales.
The S&P 500 is shaking up the contents of its broad share index with F5 Networks, Netflix and Newfield Exploration will replace The New York Times, Office Depot and Eastman Kodak. Cablevision Systems will take place of King Pharmaceuticals, but only because King Pharmaceuticals agreed to be acquired by Pfizer.
Currencies and Commodities
The dollar strengthened against the Euro and the Japanese Yen but lost ground against the British Pound.
Oil delivery for January dropped 58 cents to end at $87.79 a barrel.
Gold Futures for February delivery dropped $6.40 to settle at $1,386.40 an ounce.
Bonds
The bond prices were mixed. The Price on the benchmark 10 year US Treasury lost and the yields went up 3.3%.
