15 Reasons Markets Rallied After Ben Bernanke Spoke and Warren Buffett Bailed Out Bank of America

Dow 11,284 S&P500 1,176 Nasdaq 2,479 Gold 1,827 Oil 85

The Dow (NYSE:DIA), S&P (NYSE:SPY) and Nasdaq (NASDAQ:QQQ) finally caught a bid after a couple weeks of selling. Oil (NYSE:USO) added $3. Gold pulled back a bit, but is still in record territory. Don’t Miss: Will Gold Become Collateral for a Euro Zone Bailout?

Now, for our analysis of the 15 reasons markets moved this week:

Monday

1) Libya. As the six-month conflict began to rush quickly toward a conclusion late Sunday, the price of Brent crude began to fall as investors anticipated that Libyan supply, which has been cut off since April, may soon return. Libya, a member of OPEC, used to supply the world with 1.6 million barrels of oil per day before breaking out into civil war — nearly 2% of the global oil (NYSE:OIL) supply.

2) Euro bonds. Tempering this morning’s gains was news of German Chancellor Angela Merkel’s opposition to joint euro bonds. While many think the bonds would protect European economies against the sort of sovereign debt problems that have currently been responsible for so much widespread economic turmoil, the joint bonds would ultimately cost the German government billions of euros each year. As both the biggest and strongest economy in Europe, Germany’s borrowing costs are significantly lower than its neighbors, and estimated interest rates on euro bonds are 0.8% higher than those of German sovereign bonds.

3) Tech. Hewlett-Packard (NYSE:HPQ) continued climbing off its news last week that it would be divesting itself of its hardware business and focusing on software. The stock rose 3.64% today, leading the technology sector to outperform all of the major indices. EMC Corp. (NYSE:EMC), Google (NASDAQ:GOOG), Nokia (NYSE:NOK), IBM (NYSE:IBM), Intel (NASDAQ:INTC), and Oracle (NASDAQ:ORCL) all made significant gains, buoying markets as financial stocks rapidly declined, led by Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS). But not all technology sector components gained, with Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO), and Baidu (NASDAQ:BIDU) keeping the sector to a moderate 0.53% rally today.

Tuesday

1) New home sales. This morning the U.S. Department of Commerce released their new home sales data for July 2011, which had sales continuing to decline last month. With the housing market (NYSE:IYR) flooded by cheap foreclosure properties, new homes are facing too much competition and builders are hesitant to start new projects. And as long as the unemployment rate remains high, the high level of foreclosures will continue to dampen new home sales.

2) Banks. The markets had a shaky start this morning, but news from the FDIC that the number of banks on its “Problem List” declined last quarter for the first time since the third quarter of 2006. With the European sovereign debt crisis and new capital requirements, banks have been under a lot of stress lately, which has been stressing out investors afraid of another financial meltdown, but the FDIC’s news calmed those fears with a report that showed banks to be recovering. Unsurprisingly, the bank sector led today’s gains, with JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Barclays (NYSE:BCS), and Wells Fargo (NYSE:WFC) leading sector gains. Bank of America (NYSE:BAC) remained in trouble as questions over capitalization remain.

3) Oil. Today’s surge in the price of oil, which climbed more than 2%, gave the energy sector a boost, with Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), Halliburton (NYSE:HAL), and ConocoPhillips (NYSE:COP) all tacking on an extra 2% to 5% to their share prices. The energy sector climbed 3.58% today. Chevron and Exxon were the two biggest gainers of the Dow’s 30 components, 28 of which were up today.

Wednesday

1) Durable goods orders. One of the major measurements of the manufacturing industry, which was largely responsible for pulling the U.S. out of its recession, durable goods orders climbed 4% in July, according to a Commerce Department report this morning. The report beat expectations of a more modest 2% gain, and came off a 1.3% decline in June. However, the news is a bit bittersweet, because transportation orders made up the majority of last month’s gains. When excluding aircraft orders, which climbed 43.4% last month, and other transportation-related orders, durable goods orders only rose 0.7% in July, a small increase over the 0.6% rise in June when excluding transportation’s declines that month.

2) Japan. Moody’s Investors Service cut their credit rating for Japan (NYSE:EWJ) Wednesday, downgrading the government debt one notch to Aa3, the service’s fourth-highest rating. But for the most part, markets were unscathed, as the downgrade was not unexpected, given political instability in the country, which is about to elect its sixth prime minister in five years, the march earthquake, which drastically reduced production and exports, the rising yen, and the massive amount of government debt, which is 234% of GDP. Japan now has the same rating as China, which overtook its smaller neighbor last year to become the world’s second-largest economy.

3) Capital goods. While the market’s gains were more modest today than yesterday, capital goods stocks (NYSE:XLI) effected a lot of those gains, with the sector outperforming the rest. Leading the sector to climb 1.31% today were Caterpillar (NYSE:CAT), Deere & Company (NYSE:DE), Boeing (NYSE:BA), and Cummins (NYSE:CMI), with Dycom Industries (NYSE:DY) the biggest gainer, climbing 15.47%.

Thursday

1) Europe. While intended to protect markets from a huge sell-off that could ultimately hurt the economy, the ban on short selling in Italy, France, Spain, and Belgium has been ineffective. First instituted on August 12, the ban has failed to prevent European financial stocks from declining 8% in the last 13 days, both because government interference in the markets creates another fear factor for investors, and also because many investors don’t really understand what the short-selling ban means, or how it is applied. Today, France, Spain, and Italy decided to extend the ban for at least another month, with France considering keeping it in place until November 11, or at least until markets stabilize. On top of all that, there’s speculation that both France and Germany, the region’s two largest economies, could be facing a ratings downgrade. It seems that ineffective policies and economic woes abroad will continue to weigh down U.S. markets in the absence of positive economic news like that which had markets rallying over the last three days, paring last week’s losses.

2) Jobless claims. This morning, the U.S. Department of Labor released its weekly report on unemployment benefits applications for the week ending August 20. Last week, initial claims rose to 417,000, an increase of 5,000 from the previous week’s upwardly revised figure of 412,000. With jobless claims expected to decline last week, this morning’s figures were a huge disappointment, especially since it was only a few weeks ago that initial jobless claims fell below the 400,000 mark that signals whether the economy is adding or eliminating jobs.

3) Bank of America. With the announcement that Warren Buffett’s Berkshire Hathaway would be investing $5 billion into the bank, its share price climbed over 9%. The investment will help keep the company afloat after subprime mortgage-related losses have left the lender low on capital. Bank of America’s (NYSE:BAC) plummeting stock has been a heavy weight on the Dow, but today it was one of only two components not in the red. While markets opened up this morning, BofA’s news ultimately wasn’t enough to keep them there. Still, bank stocks were some of the biggest gainers today, with BofA leading gains by Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Barclays (NYSE:BCS), and Morgan Stanley (NYSE:MS).

Friday

1) Bernanke. While markets were headed downward this morning after Fed Chairman Ben Bernanke, speaking from an economic conference in Jackson Hole, Wyoming, announced no new plan to stimulate economic growth, as investors mulled over his speech, markets turned upward. Though Bernanke announced no official plans, no quantitative easing, he hinted that the Federal Reserve is still considering possible actions it may take to boost the economy. He also said that he has faith that, in the long term, the economy will recover based on policies already in place, including the Fed’s near-zero interest rates. The economy only needs a short-term stimulus, according to Bernanke, who expressed his hope that Congress will not prioritize cutting the deficit over instituting policies or reform that will help create jobs and improve the economy in the short term.

2) Economic data. It seems Bernanke’s faith in the economy’s recovery holds greater weight than negative economic data that would seem to disprove his assertion that the economy is steadily improving. Today the Commerce Department reported that GDP only grew 1% during the last quarter, a downwardly revised figure from the earlier reported 1.3% growth. And a monthly survey from Thomson Reuters and the University of Michigan showed that consumer confidence declined significantly in August, falling to its lowest level since November 2008, while an index of consumer expectations for six months from now, a more accurate indicator of the direction of consumer spending, dropped to its lowest level since May 1980.

3) Tech. The technology sector was the day’s best performer, climbing 2.52% as a whole. Some of the most active stocks included Apple (NASDAQ:AAPL), Baidu.com (NASDAQ:BIDU), Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), and Qualcomm (NASDAQ:QCOM), while the biggest gains were had by Aruba Networks (NASDAQ:ARUN), climbing 19.89%, and MICROS Systems (NASDAQ:MCRS), up 12.02% at close.

BONUS: What Does Steve Jobs Resignation Mean for the Future of Apple?

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