DELL Dell Inc. (MM)

 

Better-than-expected economic reports strengthened the benchmarks to negate the lingering European debt concerns for the day, as the markets ended modestly higher. The day was dominated by strong economic data including an encouraging retail sales report that reflected strong consumer spending, one of the key indicators of the economy’s health. Technology enjoyed significant gains as bellwethers like Intel and Apple gained and investors awaited results from Dell.

 

The Dow Jones Industrial Average (DJIA) gained 0.1% to close the day at 12,096.16. The Standard & Poor 500 (S&P 500) moved up 0.5% and finished the day’s trading at 1,257.81. The tech-laden Nasdaq Composite Index gained the most among these benchmarks, closing 1.1% higher at 2,686.20. Nasdaq’s gains yesterday helped it to move into positive territory for the week and it had gained 0.3% till Tuesday, while the Dow and S&P 500 are both down 0.5% so far this week. The fear-gauge CBOE Volatility Index (VIX) moved up marginally and kept hovering over 31. It was yet another day of low volumes as consolidated volumes on the New York Stock Exchange, Amex and Nasdaq were roughly 6.3 billion shares, lower than the year’s daily average of almost 8 billion shares. On the NYSE, for eight stocks that moved up, five stocks closed in the red.

 

European concerns have been constantly guiding the domestic markets, and has acted as a catalyst for the upward movement only in patches. Markets were rattled last week by a 7% spike in Italy’s 10-year bond yield, the highest jump since the time euro was launched in 1999. The country’s political crisis also dented the benchmarks, while a leadership change later during the week helped markets wash out weekly losses. This week had started on a negative note after a dismal European industrial report dented the markets. In the latest development, Italy’s 10-year bond yield jumped back over the 7% level, the 10-year bond yield for Spain leapt to 6.3% and France also noted an upswing.

 

However, after a day of robust economic reports, concerns took a backseat and failed to affect the markets once again. A more-than-expected surge in retail sales depicted higher consumer spending, which is a key indicator of the economy’s health. According to the Commerce Department, the advance estimate of U.S. retail and food services sales for October increased 0.5% to $397.7 billion and was 7.2% higher than October 2010. The 0.5% uptrend came in ahead of the consensus expectation of a 0.3% upward movement. Excluding the autos and gasoline sale, sales were up 0.7%, the biggest increase since March. The 2.5% growth rate which the economy experienced in the July-September quarter was largely helped by strong consumer spending numbers. The economy therefore expects this momentum to flow into this quarter as well.

 

Separately, a U.S. Bureau of Labor Statistics’ report on the Producer Price Index (PPI) depicted lower inflationary pressure after the PPI declined 0.3% in October after finished goods prices increased 0.8% in September and August posted flat figures. The fall is higher than consensus expectations of a drop of 0.1%.

 

The Empire State manufacturing index, the regional economic indicator published by the Federal Reserve Bank of New York, also turned positive for the first time after residing in the negative zone for the last five months. The report stated:  “After a string of five consecutive months of negative readings, the general business conditions index rose nine points, to 0.6”.

 

Coming to sectoral stocks, it was the tech sector that largely contributed to the rally. Warren Buffett’s company Berkshire Hathaway Inc. (NYSE:BRK-A) (NYSE:BRK-B) recently announced that it has taken up stakes in International Business Machines Corp. (NYSE:IBM) and Intel Corporation (NASDAQ:INTC) and these stocks rose 0.8% and 2.9%, respectively. Among other bellwethers, Apple Inc. (NASDAQ:AAPL), Hewlett-Packard Company (NYSE:HPQ) and Oracle Corporation (NASDAQ:ORCL) jumped 2.5%, 3.4% and 2.0%, respectively. Meanwhile, shares of Dell Inc. (NASDAQ:DELL) jumped 2.0% even as the company awaits third quarter results.

 

 

 
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