Markets Set to End the Quarter With Gains

A more favorable reading from a gauge of Midwest economic activity set off a rally Thursday morning that had major U.S. equity averages in striking distance of a positive finish to the second quarter.

The Chicago Purchasing Managers Index for June came in today at 61.1, substantially better than the 54 rating that was expected. Prices paid were lower than they have been since November of last year, thanks in large part to the drop off in oil prices last week that lowered the month’s average. Unfortunately the employment portion of the PMI was at its lowest level since last December, which, when compiled on top of today’s report that initial jobless claims last week were higher than expected, and the end of QE2, would seem enough to push down markets. However, markets remain ebullient, with all the major indices up today and looking set to finish their fourth straight day of gains.

The Dow Jones Industrial Average (NYSE:DIA) is now up to 12,405, completely erasing quarterly losses and then some and set to end the quarter up at least 100 points. The S&P 500 (NYSE:SPY) is close to erasing losses, needing a gain of just six points, while the Nasdaq needs just eight more points. All three indices are up roughly 1% today, and up 3-5% since last Friday.

The Fed’s $600 billion Treasury purchase program, known as QE2, ends today on expectations that another period of quantitative easing won’t be necessary, though treasury prices have already begun to fall as yields were pushed too low by the Fed. Of course, should the economy take a turn for the worse, the Fed would step in with another QE.

And yet, with all that, it seems the continuing stream of positive news coming out of Greece has breathed new life into the markets. Yesterday parliament voted in favor of the new austerity package, and today they vote on how to implement those reforms. While the Greeks aren’t too happy with massive public sector cuts, the rest of the world is more focused on the fact that Greece has, for now, avoided defaulting on their debt, a relief to their debtors and anyone with a significant stake in the well-being of Greece’s debtors, which is, essentially, the entire world.

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