S&P Gains 1.9% in August, Gold Advances to 4-Month High

Bikram Pandey
31 Aug, 2012
New York City

U.S. indexes traded higher after Fed Chairman Bernanke laid out a case for additional stimulus but did not offer specific steps. He also highlighted that elevated unemployment is likely to persist. Broader market averages in New York gained for the third month in a row.

[R]4:10 PM New York – U.S. indexes traded higher after Fed Chairman Bernanke laid out a case for additional stimulus but did not offer specific steps. He also highlighted that elevated unemployment is likely to persist. Broader market averages in New York gained for the third month in a row.[/R]

U.S. indexes shot up at the opening on the prospect of new stimulus measures from Fed after a forceful speech from Chairman Ben Bernanke.

Bernanke delivered highly anticipated speech at a gathering of central bankers from around the world organized by the Federal Reserve Bank of Kansas that highlighted the benefits of the past stimulus measures.

He also cited the persistent weakness in labor markets and offered the strongest support for a clear need to do more. In his prepared statement he added that the Fed is prepared to act and provide additional policy accommodation to “promote a stronger economic recovery and sustained improvement in labor conditions in the context of price stability.”

However, Bernanke neither announced specific measures nor offered a timetable for steps but most economists have heightened expectations of new steps as early as next month.

Fed observers expect the next measures to be announced at the time of next rate setting committee’s meeting ending on September 13.

Market averages in New York gained and the S&P 500 index closed down 0.3% in the week but rose 2% in August, third monthly increase in a row. The Nasdaq index decreased 0.1% in the week and gained 4% in the month.

In corporate news, SAIC planned to separate into two publicly traded companies. Esterline Technologies reported quarterly loss. Gordmans Stores net jumped 21% on flat comparable sales. OmniVision net tumbled 95% and SAIC net plunged 38%.

The European indexes were generally flat after inflation in the region rose to 2.6% and jobless rate inched up to a record high of 11.3%. Spanish current account deficit fell in June but net capital outflow from the banking system accelerated.

Bankia, the fourth largest bank by assets in Spain, set aside €6.8 billion to provision for bad loans and real estate and the bank said additional €6.9 billion of charges are expected in the second half.

Bankia also said that deposits declined 11% or €12.3 billion in the first half to €106.88 billion.

Spain’s bank rescue fund, also known as FROB is expected to inject additional funds as much as 5 billion in advance of the 19 billion that the bank is expected receive from the EU.

Euro zone inflation climbed to 2.6% in August. Jobless rate rose in the euro area to a record 11.3%, German retail sales declined unexpectedly and Italian jobless rate stable in July.

The UK market indexes advanced and consumer confidence index remained unchanged and home prices declined in August. Computacenter first-half group revenue rose 4.2% to £1.42 billion. Restaurant Group said first revenues increased 7% and adjusted net rose 7.5%.

Market indexes in Tokyo traded lower and the benchmark index fell to a one-month low after industrial production declined in July. The consumer price index barely increased stoking fears of deflation. Machinery makers fell for the second week on the worries of falling orders from mining companies.

Australian stocks were generally quiet as the earnings season winds down and investors await the release of economic data from China this weekend. Resource sector stocks were in focus on the prospect of profit decline. Harvey Norman, the retailer reported full-year net declined.

Commodities, Bonds and Currencies

The yield on 10-year bond decreased to 1.56% and on 30-year bond fell to 2.68%.

The U.S. dollar inched lower to $1.2579 to a euro and decreased against the Japanese yen to 78.31 yen.

Immediate delivery futures of Texas crude oil increased $1.77 to $96.39 a barrel and Brent crude increased 2.01 cents to $114.60, futures of natural gas rose 0.05 cents to $2.81 per mbtu and gasoline price edged up 2.3 cents to 310.56 cents a gallon.

In metals trading, copper increased 0.70 cents to $3.45 per pound, gold soared $34.60 to $1,691.70 per ounce and silver added %1.17 to $31.61.