Speculation on Fed Action Drives U.S. Stocks Higher, Global Markets Rest

Bikram Pandey
14 Jun, 2012
New York City

Stocks rallied and U.S. indexes advanced more than 0.7% as speculation about central bank actions mounted after the release of latest inflation data. Crude oil and gold gained. European indexes fell as trading volume dried up ahead of Greek election. Foreign investors in Japan switched to bonds.

[R]4:00 PM New York – Stocks rallied and U.S. indexes advanced more than 0.7% as speculation about central bank actions mounted after the release of latest inflation data. Crude oil and gold gained. European indexes fell as trading volume dried up ahead of Greek election. Foreign investors in Japan switched to bonds from stocks.[/R]

U.S. indexes gained as speculation mounted that central banks next week may take steps to spur economies on both sides of Atlantic. The U.S. Fed is scheduled to meet next week for two days and the latest inflation data stoked speculation for more stimulus measures.

In economic data, weekly U.S. jobless claims rose 6,000 to 386,000 and consumer prices fell 0.3% in May after staying flat in April.

Stress in the euro zone was across the region and in was prominent in the bond market. The euro area contagion worries notched up after Spanish 10-year yield crossed 7% and Italian yields rose. Spanish home prices fell at the fastest pace in three years and two leading parties with opposing views on austerity and the euro zone are running neck to neck in opinion polls ahead of Sunday’s elections.

In corporate news, Korn/Ferry fourth quarter slumped 41% and Pier 1 Imports first quarter net grew and lifted its fiscal outlook. Kroger first quarter net gained 1.6% to $439.4 million. Quest Software received proposal to acquire for $25.50 per share of common stock in cash.

Nokia said it plans to cut 10,000 positions by the end of next year and 3,700 of cuts will be in Finland. The struggling handset maker is also looking to find ways to cut losses at its joint venture with Siemens.

Japanese stocks extended losses as foreign investors sold stocks bonds for the eighth week and added bonds for the third week. Exporters and resource stocks declined after interest rates on Italian and Spanish bonds rose.

Australian stocks traded lower on the growing worries that commodities prices may remain depressed for the rest of the year as euro zone struggles to contain debt contagion. Gloucester Coal plans to pay special dividend of $95 million.

Commodities, Bonds and Currencies

The yields on 10-year U.S. bonds increased to 1.63% and 30-year U.S. bonds edged up to 2.72%.

The U.S. dollar edged lower 0.4% to $1.261 to one euro and gained against the Japanese yen to 79.32 in New York trading.

Immediate delivery futures of Texas crude oil increased $1.67 to $84.29 a barrel and Brent crude futures rose 96 cents to $97.68. Futures of natural gas increased 3 cents to $2.49 per mbtu and gasoline price increased 3.2 cents to 268.73cents a gallon.

In metals trading, copper increased 2.25 cents to $3.36 per pound, gold increased $5.50 to $1,619.70 per ounce and silver fell 29 cents to $28.65.