Weekly Market Recap: Dexia Helped the Dow Retake 11,000, while Gold and Oil Popped

Dow 11,103 S&P500 1,155 Nasdaq 2,479 Gold 1,636 Oil 82

The Dow (NYSE:DIA), S&P (NYSE:SPY) and Nasdaq (NASDAQ:QQQ) all rebounded on talks of continued resolution in Europe. On the commodities front, Oil (NYSE:USO) jumped $4 and Gold (NYSE:GLD) stopped its recent sell off.

Hot Feature: What Does the Unemployment Picture Mean for Precious Metals?

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

Monday

1) Manufacturing. The U.S. manufacturing sector reversed a downward trend in September, according to this morning’s ISM report, with the sector expanding at a faster rate than in the previous month. Though manufacturing has been expanding for the last 24 consecutive months, the rate at which it was expanding was slowly to snail’s pace. Last month’s reversal was rather unexpected, but unfortunately wasn’t enough to renew investors’ faith in the economy as more pressing issues took precedence.

2) Greece. The Greek cabinet announced its new budget today, which had the country cutting its deficit by less than the agreed upon figure that was part of its bailout, making it questionable whether the nation will receive its next tranche of aid, due this month, in order to prevent default. Greece was supposed to reduce its deficit to 17.1 billion euros, or 7.8% of GDP, but the newly-announced budget instead cuts the deficit to 18.69 billion euros, or 8.5% of GDP. In the past, troika officials from the EU, IMF, and European Commission, have said they will not release Greece’s next tranche of aid unless the country meets all of the requirements of its bailout package, but Greek Prime Minister George Papandreou says parliament was unable to make as many cuts because the economy had contracted more than expected, now expected to shrink 5.5% this year rather than 3.8%. 

3) Capital goods. By far today’s worst-performing sector, capital goods declined 3.76% today. The sector’s most heavily traded stocks — Deere & Company (NYSE:DE), Honeywell (NYSE:HON), The Boeing Company (NYSE:BA), and Caterpillar (NYSE:CAT) — all declined more than 3% today, while stocks like Cemex (NYSE:CX), Fuel Tech (NASDAQ:FTEK), GenCorp (NYSE:GY), Manitowoc Company (NYSE:MTW), and PulteGroup (NYSE:PHM) had the most impressive losses, all declining more than 10%.

Tuesday

1) Bernanke. Federal Reserve Chairman Ben Bernanke said today that the central bank is prepared to take additional steps to boost U.S. economic growth, while he cautioned lawmakers against making moves to balance the budget that would harm recovery efforts. However, while he assured the public the Fed would do its best to stimulate growth, in his testimony before Congress’s Joint Economic Committee, Bernanke noted economic indicators, such as initial unemployment benefits applications and surveys of hiring plans, that he said “point to the likelihood of more sluggish job growth in the period ahead.” Furthermore, he did not detail any specific plans to combat the economic slowdown, and said that though “monetary policy can be a powerful tool…it is not a panacea for the problems currently faced by the U.S. economy.” For the economy to turn around, Bernanke believes it will take “a wide range of other policies” pertaining to labor markets, housing, trade, taxation, and regulation.

2) Banks. The markets were down for most of the day, particularly bank stocks, which have been continually nailed on concerns over their exposure to European sovereign debt. However, markets got a boost late in the day following a report that European Union officialswere examining ways to coordinate the recapitalization of struggling banks and valuations. Even Bank of America (NYSE:BAC), down as much as 2% within the last hour of trading, rallied to a 4.16% gain by closing bell. Citigroup (NYSE:C), JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and Barclays (NYSE:BCS) all joined in the rally, which had 11 of the 12 major sectors trading up, as well as the three major U.S. indices. 

3) Transportation. As oil prices continue to decline, transportation companies are looking at lower fuel costs, usually one of the single-largest expenses for commercial airlines and shipping companies. For that reason, the transportation sector was one of today’s best performers, with all of the following trading higher today, even before news from EU officials gave markets a boost: United Parcel Service (NYSE:UPS), Union Pacific Corp. (NYSE:UNP), FedEx (NYSE:FDX), AMR Corp. (NYSE:AMR), Patriot Transporation (NASDAQ:PATR), Norfolk Southern (NYSE:NSC), JetBlue (NASDAQ:JBLU), Delta Air Lines (NYSE:DAL), US Airways (NYSE:LCC), United Continental Holdings (NYSE:UAL), Alaska Air Group (NYSE:ALK), and Southwest Airlines (NYSE:LUV).

Wednesday

1) Economic data. The Institute for Supply Management’sindex of non-manufacturing businesses had the services sector expanding for the 22nd consecutive month in September, though its rate of growth slowed slightly last month when compared to August. While the Employment Index decreased 2.9 percentage points to 48.7%, indicating contraction in employment after 12 consecutive months of growth, an Automatic Data Processing (NASDAQ:ADP) report also released this morning had the private sector adding 91,000 jobs in September, enough to keep the unemployment rate steady at 9.1%.

2) Europe. Markets continue to react to every piece of news coming out of Europe, and today German Chancellor Angela Merkel’s announced that her government would support plans to recapitalize banks. Merkel’s expression of her support for recapitalization followed a report from the International Monetary Fund calling for such a plan in order to ward off another economic slowdown that could result in a double-dip recession. With the leader of the euro zone’s largest economy supporting a measure to recapitalize banks, it now seems more likely that, should it be necessary, Europe will step up to shore up the financial sector.

3) Tech. Two of the Dow’s biggest earners today were Hewlett-Packard (NYSE:HPQ) and Cisco (NASDAQ:CSCO), while Yahoo (NASDAQ:YHOO) climbed on rumors that Microsoft (NASDAQ:MSFT) might be considering acquiring the Internet company, helping the tech-heavy Nasdaq to a higher close. Apple (NASDAQ:AAPL) continued to rally today after taking a dip yesterday following the announcement of the iPhone 4s, which many had hoped would be an iPhone 5, but it was Research in Motion (NASDAQ:RIMM) that was the sector’s biggest earner, with shares climbing over 12% on rumors that Vodafone (NASDAQ:VOD) might be among interested in bidding on the smartphone maker.

Thursday

1) Bank of England. The Bank of England announced today plans to expand its bond-buying program for the first time in almost two years as government budget cuts, combined with Europe’s debt crisis, pose an increasing threat to Britain’s economic recovery. The central bank will commit 275 billion pounds to buying sovereign debt, and expects to complete the new round of bond purchases within four months. The news gave U.S. markets a jump right out of the gate, but Jean-Claude Trichet’s announcement that the European Central Bank would keep interest rates at 1.5% disappointed many investors who expected the ECB to cut interest rates

2) Jobless claims. The Department of Labor’s Unemployment Insurance Weekly Claims Report for last week was released this morning. While initial unemployment benefits claims for the week ending October 1 rose to 401,000, an increase of 6,000 from the previous week’s revised figure of 395,000, the figure was lower than expected. Furthermore, the four-week moving average declined from 418,000 to 414,000. 

3) Banks. Financials were some of the best-performing stocks today, led higher by Bank of America (NYSE:BAC), which climbed nearly 9%, followed by Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and JPMorgan (NYSE:JPM), all of which out-performed the major indices.

Friday

1) Jobs. A better-than-expected jobs report gave markets a boost in early trading. The U.S. Department of Labor announced this morning that the economy added 103,000 jobs in September, beating Wall Street’s expectations, while the report also upwardly revised an especially weak August reading. But despite the net increase in jobs in the U.S. over the last few months, job growth remains below what is needed to bring down the unemployment rate, which remained steady at 9.1% in September for the third straight month, just as analysts had expected. The unemployment rate has been hovering within close range of 9% since April 2009. Furthermore, part of last month’s gain was the result of roughly 45,000 unionized workers returning to Verizon (NYSE:VZ) following a strike. Still, payrolls were up over the prior two months by a cumulative 99,000.

2) Downgrades. While this morning’s jobs report gave markets an early boost, they soon reversed when Fitch downgraded the foreign and local currency ratings on Italy and Spain, the euro zone’s third- and fourth-largest economies. The news follows Moody’s decision to downgrade Italy by three notches on Tuesday, and comes on the same day that Moody’s cut the senior debt and deposit ratings of twelve financial institutions in the U.K. and nine in Portugal. 

3) Banks. Bank stocks tumbled today after Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta, told a town hall gathering in Atlanta that regulators “can’t guarantee” against the failure of individual firms. One of yesterday’s best-performing stocks, Bank of America (NYSE:BAC) fell nearly 4% today, leading the financial sector lower. Also declining were JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), Barclays (NYSE:BCS), and Citigroup (NYSE:C).

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