Wall Street Rallies on Yen Intervention, Libya Action

Marcus Jacob
18 Mar, 2011
New York City

U.S. stocks traded higher after G-7 central bankers conducted a coordinated currency market intervention. The joint action, first in a decade also highlighted fragile global recovery and need to dampen speculative volatility. U.N. passed a no-fly zone over Libya. Cisco declared a quarterly dividend.

[R]10:40 AM New York – U.S. stocks traded higher after G-7 central bankers conducted a coordinated currency market intervention. The joint action, first in a decade also highlighted fragile global recovery and need to dampen speculative volatility. U.N. passed a no-fly zone over Libya. Cisco declared a quarterly dividend and Nike declined after earnings.[/R]

Stocks in New York opened higher following the gains in Europe and Asia after G-7 nations agreed to coordinate their efforts to drive the yen lower. Separately, China’s central bank lifted bank reserve ratio by 50 basis points.

Japan’s finance minister Yoshihiko Noda announced the agreement at a press gathering at the finance ministry after a 90-minute teleconference with G7 members.

He added that G7 central bankers agreed to carry out a coordinate move, the first since 2000 to prevent “excess volatility and disorderly movement” in the yen.

The stability of the yen is extremely important for Japan and for the global economic recovery as many Japanese companies rely on exports and lower yen is crucial for these businesses and the recovery Japan.

Minister Noda also confirmed that he is not targeting any specific level for the yen and said that the ministry began selling the yen through the Bank of Japan today and will central banks in Europe and the U.S. will sell more yen as the trading shifts later in the day.

The yen temporarily dropped from 79.19 yen to a dollar before the announcement to 81.49 yen after two hours of intervention carried out by the Bank of Japan. By the end of the day the central bank had pumped $37 billion or 3 trillion yen in the financial system.

In New York the yen traded at 81.18 to a dollar but a persistent intervention may be needed for one month to keep the yen between 82 yen and 83 yen to a dollar.

The sentiment also improved after Libyan foreign minister announced the cease fire and U.N. passed a resolution to a no-fly zone over Libya. However, no details were provided in the statement.

Nymex crude oil futures traded down 45 cents to $100.96 after the U.N. resolution.

Stock Movers

Cisco Systems Inc ((CSCO)) increased 1.5% to $17.27 after the networking company said it will begin paying dividend of six cents a share.

CostPlus, Inc ((CPWM)) dropped 7.7% to $9.97 after the furniture and food retailer said fourth quarter sales rose 7.1% to $319 million and same store sales increased 7.7% compared to a 2.5% decline in the quarter a year ago.

Net income in the quarter was $28.8 million or $1.24 a share compared to $21 million and 95 a share in the quarter a year ago.

The retailer estimated first quarter sales between $196 million and $200 million on same store sales increase between 4% and 6% and for the fiscal 2011 sales between $946 million and $956 million based on same store sales increased between 4% and 5%.

Nike Inc ((NKE)) declined more than 8% to $77.85 after the athletic shoe maker reported third quarter earnings and revenues that were lower than expected.

Polypore International Inc ((PPO)) declined 5.6% to $52.53 after the maker of filtration and membrane separation for battery components said its shareholders Warburg Pincus and chief executive are selling 4.5 million shares at $52.75 a share.

SeaChange International Inc declined 5.5% to $8.83 after the technology and broadband video application provider forecasted first quarter adjusted earnings of 3 cents a share.