Small Caps and Tech Stocks Drive U.S. Records; Fresh Peak in Gold

Bikram Pandey
27 Apr, 2011
New York City

U.S. stocks extended gains for the sixth day after the Fed left rates unchanged and left the bond program intact. The Nasdaq closed at a high last seen a decade ago and the small companies focised Russell 200 index reached a new high. The dollar continued its slide and precious metals gained.

[R]4:00 PM New York – U.S. stocks extended gains for the sixth day after the Fed left rates unchanged and the bond program intact. Earnings from Moody’s, Whirlpool and ConocoPhillips lifted the market sentiment. Amazon first quarter net declined 33%. The dollar continued its slide and precious metals gained.[/R]

U.S. indexes extended highs of multi-years after durable goods orders surged in March and the Federal Reserve left target rate unchanged between zero and 0.25%. The move was widely expected and stocks built on the early gains after the rate decision.

The Dow closed near the high last seen in May 2008 and the S&P 500 index was at its highest since June of three years ago. The small companies focused Russell 200 index closed at an all-time high and the Nasdaq Composite index at its highest since Dec 12, 2000.

Chairman Bernanke at the first ever press conference after the decision stressed that the end of the bond buying program at the end of this quarter will have little impact on the economy. The Fed is expected to reinvest maturing securities into long term bonds of the government and its agencies.

The accompanying statement from the Fed noted the moderate economic recovery and gradually improving labor markets. The rate setting committee was unanimous in its decision to keep the rate unchanged and also noted that the $600 billion bond buying program will be completed this quarter.

Bernanke also said that the recent increase in food, energy and commodities prices are likely to have “transitory” effect on inflation. However, in the last ten years price of retail gasoline has more than quadrupled and of food basket for a family of four has jumped more than doubled.

In earnings news, Amazon first quarter net earnings slumped 33% to $201 million. ConocoPhillips first quarter net income rose to $3 billion. Moody’s first quarter net income rose to $155.5 million. Office Depot reported first quarter net loss of $14.6 million. Whirlpool first quarter net income rose to $169 million.

IBM authorized $8 billion for stock buyback. SMART Modular agreed to be acquired by Silver Lake Partners and Silver Lake Sumeru for $645 million.

Across the Atlantic, European indexes gained after strong corporate earnings. Automakers led the way with Volkswagen and Volvo reporting better-than-anticipated profit. Nokia planned to outsource Symbian activities to Accenture. J&J agreed to acquire Synthes in $21.3 billion deal.

Euro-zone industrial order growth slowed in February. German consumer sentiment forecasted to weaken in May and French consumer sentiment remained static in April. Finnish manufacturing confidence fell and consumer sentiment improved in April. Polish retail sales eased and jobless rate fell in March.

The UK indexes advanced after service index rose 1.5% in February, GDP expanded 0.5% in the first quarter, and mortgage approvals climbed in March. BP, Fenner and GlaxoSmithKline reported strong earnings.

Ahead of week long holidays and earnings release in thin trading, Tokyo stocks rebounded after Canon, Fanuc, Daihatsu and Kuraya reported higher earnings. Canon soared 7% after the company suggested parts supply issue is expected to be resolved in few months. Fanuc gained more than 3% after it guided higher profit in the current fiscal half.

Stocks in Mumbai lost momentum in the early afternoon and closed at the low of the day. Ambuja Cement declined 4% after net dropped 12%. Reliance Industries face a government fine as it misses the production target. Dabur dropped 2% after net rose less than expected 8.5%.

Australian stocks declined on the first day of trading since Thursday last week. The dollar gained after the latest read on inflation showed a surge in the first quarter on severe weather conditions. Macarthur Coal’s first quarter production dropped 56% after the most severe flooding in seventy years and Cyclone Yasi in Queensland.

Commodities, Bonds and Currencies

The 10-year bond yield increased to 3.36% and 30-year bond fell to 4.39%.

The U.S. dollar decreased to $1.477 to a euro and rose against the Japanese yen to 82.27 yen.

Immediate delivery futures of Texas crude oil increased $0.55 to $112.76 a barrel, of natural gas decreased 0.03 cents to $4.41 per mbtu and gasoline prices increased 6.22 cents to 341.94 cents a gallon.

In metals trading, copper prices decreased 9.30 cents to $4.24 per pound, gold increased $13.60 to $1,517.10 per ounce and silver increased $0.91 to $45.98.